Tobacco Documents Online

ROBERT C. (BOBBY) SCOTT 3D DISTRfCT, VIRGINIA 501 CANNON CIEPICE BUILDING WASHINGTON. DC 20515-4603 (202)2 2 5-83 5 1 COMMITTEES: EDUCATION AND LABOR SUBCOMMITTEES: POSTrSECONOARY EDUCATION AND TRAINING SELECT EDUCATION AND CIVIL RIGHTS HUMAN RESOURCES JUDICIARY SUBCOMMITTEE: ECONOMIC AND COMMERCIAL LAW SCIENCE. SPACE. AND TECHNOLOGY SUBCOMMITTEE: ENERGY, VICE CHAIRMAN 1 Cottgremq of the Mniteb *tate!5 30ouge of Aepre!6etttatibe,5 Mazfjington, MC 20515-4603 DISTRICT OFFICES: NEWPORT NEWS: 2600 WASHINGTON AVE. SUITE 1010 NEWPORT NEWS. VA 23607 (804) 380-1000 RICHMOND: THE JACKSON CENTER 501 N. 2ND STREET RICHMOND. VA 23219-1321 (804) 644-4845 Statement of Representative Robert C. Scott on the Economic Impact of a 75 Cent Per Pack Cigarette Tax on the Economy of Virginia Mr. Chairman, I appreciate the opportunity to testify today on the cigarette tax proposal contained in the Administration's health care proposal. The tax increase of 75 cents per pack would raise the current excise tax by more than 300% and result in significant job and payroll losses for -ay District and the state of Virginia. . Three years ago a tobacco manufacturer closed a plant in Petersburg, Virginia where many of the workers, my constituents, were earning high wages. Today a majority of those who lost their jobs have still been unable to find work with comparable pay, so I am quite aware of the vital economic contribution that the tobacco industry makes to Virginia's economy. In 1990, the accounting and economic consulting firm of Price Waterhouse reported that the tobacco industry directly employed over 10,800 tobacco manufacturing jobs in Richmond, Virginia's capitol and the -heart of my District. The payroll from these jobs was approximately $600 million. The Price Waterhouse report stated that if a 75 cent per pack tax increase were enacted, it would cause approximately 14% of the Richmond-based tobacco manufacturing jobs to be eliminated. These jobs represent more than $75 million in salaries and wages which would also be lost to the economy. Additionally, the economic ripple effect will reduce the demand for all sorts of goods and services linked to the tobacco industry and its income base. Moreover, Mr. Chairman, there are a number of jobs that are indirectly tied to the manufacture of tobacco products such as machinery, maintenance services and paper production. Price Waterhouse estimates show more than 1400 of these indirect jobs would be loss and more that $75 million of additional payroll would disappear. Aside from the devastating effects that the 75 cents per pack increase would have on my constituents and Richmond's businesses, the tobacco industry accounts for more than 44,500 jobs and provides approximately $1.4 billion in salaries and wages statewide. It is projected that the proposed tax increase would cut cigarette sales by more than 120. In total, Mr. Chairman, my PRINTED ON RECYCLED PAPER

District stands to lose 3000 jobs and more than $150 million in wages and salaries. The South, where most of the tobacco is farmed and cigarettes manufactured, would be hit 3.5 times as hard as any other region of the country if this tax is allowed to stand. Clearly this is not fair to those whose livelihoods are dependent upon tobacco. The cigarette tax is also unfair because it is regressive and will fall most heavily on those with lower and middle incomes. Peat Marwick, another respected economics firm, reported that even though 54% of American households earn $30,000 or less per year they account for only 19% of all earned income. The study points out, however, that the bulk of state and federal cigarette excise taxes are paid by these citizens. This Congress was willing to remove a luxury tax on boats that was paid by the wealthiest segment of our society because it hurt boat builders and therefore cost this country jobs. It is ironic that we are now considering putting a tax on the poorest members of our society that will cost the U.S. jobs in the tobacco industry. In the budget bill, we passed in August, by the narrowest of margins, we recognized that excise taxes do have a direct impact on employment. This tax will not only cost jobs but places an excessive burden on those who can least afford it. Mr. Chairman, the 75 cents per pack cigarette tax increase is unfair to my constituents. It is unfair to the growers and farmers who live and work in Virginia. It is unfair to those who work in indirect jobs. And, finally, it is unfair to the low and middle income taxpayers. Mr. Chairman, we must eliminate this tax if health care reform is to be grounded on fairness and equity and is to be accepted by all Americans.