[Congressional Record Volume 140, Number 30 (Thursday, March 17, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 17, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
       TOBACCO HEALTH TAX AND AGRICULTURAL ASSISTANCE ACT OF 1994

                                 ______


                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Thursday, March 17, 1994

  Mr. STARK. Mr. Speaker, today I am introducing a bill to increase the 
cigarette excise tax to $2 a pack. I am joined in this bill by Mr. 
Durbin, Mr. Hansen, Mr. Waxman, Mr. Synar, Mr. Evans, Mr. Oberstar, Mr. 
Markey, Ms. Roybal-Allard, Ms. Harman, Mr. Andrews of Texas, Mr. 
Meehan, and Mr. Visclosky as original cosponsors.
  My bill provides revenues for health reform as well as significant 
financial assistance for tobacco workers and regions adversely affected 
by the tax. In addition, the bill creates a health education fund to 
educate Americans about the risks associated with certain activities 
such as smoking and chewing tobacco.
  The perils of smoking are acknowledged by all independent sources. 
Tobacco products--used as intended--kill over 1,100 Americans every 
day. Each year, over 400,000 Americans die from tobacco-related 
illnesses, creating more deaths than from alcohol, drug abuse, 
homicide, suicide, automobile and airplane accidents, and AID's 
combined.
  A $2 a pack tax could change all that. As most smokers become 
addicted to nicotine at an early age, preventing teenage smoking should 
substantially reduce the adult smoking population. The most effective 
way of reducing tobacco addiction, especially among teenagers, is to 
increase the price of tobacco products through taxes. According to the 
General Accounting Office [GAO], ``the economic literature supports the 
prediction that increasing the Federal excise tax on cigarettes should 
reduce the number of teenage smokers significantly.''
  The American Cancer Society, the American Heart Association, and 
American Lung Association estimate that raising tobacco taxes to $2 a 
pack would save over 1.7 million people alive today.
  Opponents of any tobacco tax argue that a tax increase of this size 
will wreak havoc on rural communities and workers whose livelihood 
depends on tobacco. I suggest that this bill creates a solution instead 
of a problem.
  As cigarette taxes have increased, so has cigarette production. 
Tobacco companies now produce 28 billion more cigarettes per year due 
to aggressive expansion of the export market.
  Increased production has not brought a corresponding increase in U.S. 
manufacturing jobs. The workers who filled the halls of Congress this 
month experienced a 29-percent decrease in jobs over the last decade 
due to automation and shifting of production jobs overseas--business 
decisions by tobacco companies.

  Nor has increased production of cigarettes brought prosperity to 
tobacco farmers. Forty thousand tobacco farms disappeared in the last 
10 years because tobacco companies are now importing more than one-
third of the tobacco used in U.S. manufactured cigarettes.
  This is an ominous trend for farmers and factory workers who depend 
on tobacco to earn their livelihood. They will lose every time they 
stand in the way of a generous return to stockholders of Philip Morris 
or RJR. My bill offers a way out. It helps pay for a better future by 
creating a trust fund to ease the transition to economic 
diversification. Farmers could use this fund to improve access to 
market for other crops. Communities could receive grants to attract new 
industry. By setting aside 2 percent of the net increase for a period 
of 5 years, hundreds of millions of dollars would be generated each 
year to redesign, retrain, and retool for a productive future.
  My bill would also create an education fund with 1 percent of the net 
tax increase to allow the Secretary of HHS to educate Americans on 
healthy choices. Experience at both the Federal and State level shows 
that the public responds to media messages on tobacco. In my home State 
of California, a 12-month media campaign in 1990 resulted in a 12 
percent decline in consumption. This bill creates the resources for the 
Secretary to educate the public on issues of health.
  Mr. Speaker, two-thirds of the American electorate fully supports 
raising tobacco taxes by $2 a pack, including 65 percent of the voters 
in the tobacco-producing States of Georgia, Kentucky, North Carolina, 
Virginia, South Carolina, and Tennessee. Our constituents have spoken. 
Now it is our responsibility to act.
  The bill is as follows:

                                H.R. --

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``Tobacco 
     Health Tax and Agricultural Assistance Act of 1994.''
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

       (a) Cigarettes.--Subsection (b) of section 5701 is 
     amended--
       (1) by striking ``$12 per thousand ($10 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (1) 
     and inserting ``$100.00 per thousand'',
       (2) by striking ``$25.20 per thousand ($21 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (2) 
     and inserting ``$210.00 per thousand'', and
       (3) by adding at the end thereof the following new 
     paragraph:
       ``(3) Additional tax on packs containing fewer than 20 
     cigarettes.--On any pack of cigarettes containing fewer than 
     20 cigarettes, the excess of $2 over the tax imposed by 
     paragraphs (1) and (2) on the cigarettes in such pack.''
       (b) Cigars.--Subsection (a) of section 5701 is amended--
       (1) by striking ``$1.125 cents per thousand (93.75 cents 
     per thousand on cigars removed during 1991 or 1992)'' in 
     paragraph (1) inserting ``$89.14 per thousand'', and
       (2) by striking ``equal to'' and all that follows in 
     paragraph (2) and inserting ``equal to 105.8 percent of the 
     price for which sold but not more than $250.03 per 
     thousand.''
       (c) Cigarette Papers.--Subsection (c) of section 5701 is 
     amended by striking ``0.75 cent (0.625 cent on cigarette 
     papers removed during 1991 or 1992)'' and inserting ``6.24 
     cents''.
       (d) Cigarette Tubes.--Subsection (d) of section 5701 is 
     amended by striking ``1.5 cents (1.25 cents on cigarette 
     tubes removed during 1991 or 1992)'' and inserting ``12.5 
     cents''.
       (e) Smokeless Tobacco.--Subsection (e) of section 5701 is 
     amended--
       (1) by striking ``35 cents (30 cents on snuff removed 
     during 1991 or 1992)'' in paragraph (1) and inserting 
     ``$29.70'', and
       (2) by striking ``12 cents (10 cents on chewing tobacco 
     removed during 1991 or 1992)'' in paragraph (2) and inserting 
     ``$29.46''.
       (f) Pipe Tobacco.--Subsection (f) of section 5701 is 
     amended by striking ``67.5 cents (56.25 cents on pipe tobacco 
     removed during 1991 or 1992)'' and inserting ``$30.01''
       (g) Inflation Adjustment of Tobacco Tax Rates.--Section 
     5701 is amended by adding at the end thereof the following 
     new subsection:
       ``(i) Inflation Adjustment.--
       ``(1) In General.--In the case of articles removed in any 
     calendar year after 1994, each rate of tax contained in this 
     section shall be increased by an amount equal to--
       ``(A) such rate, multiplied by
       ``(B) the greater of--
       ``(i) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the removal 
     occurs by substituting `calendar year 1993' for `calendar 
     year 1992' in subparagraph (B) thereof, or
       ``(ii) the cost-of-living adjustment which would be 
     determined under clause (i) if only changes in the tobacco 
     and smoking products component of the Consumer Price Index 
     (as defined in section 1(f)(5)) were taken into account.

     If any increase determined under this subsection is not a 
     multiple of \1/4\ cent, such increase shall be rounded to the 
     nearest \1/4\ cent.
       ``(2) Special rule.--No adjustment shall be made under 
     paragraph (1) in the percentage rate set forth in subsection 
     (a)(2) but such adjustment shall apply to the dollar amount 
     contained therein.''
       (h) Effective Date.--The amendments made by this section 
     shall apply to articles removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after September 30, 1994.
       (i) Floor Stocks Taxes.--
       (1) Imposition of tax.--On tobacco products and cigarette 
     papers and tubes manufactured in or imported into the United 
     States which are removed before October 1, 1994, and held on 
     such date for sale by any person, there is hereby imposed a 
     tax in an amount equal to the excess of--
       (A) the tax which would be imposed under section 5701 of 
     the Internal Revenue Code of 1986 on the article if the 
     article had been removed on such date, over
       (B) the prior tax (if any) imposed under section 5701 or 
     7652 of such Code on such article.
       (2) Authority to exempt cigarettes held in vending 
     machines.--To the extent provided in regulations prescribed 
     by the Secretary, no tax shall be imposed by paragraph (1) on 
     cigarettes held for retail sale on October 1, 1994, by any 
     person in any vending machine. If the Secretary provides such 
     a benefit with respect to any person, the Secretary may 
     reduce the $500 amount in paragraph (3) with respect to such 
     person.
       (3) Credit against tax.--Each person shall be allowed as a 
     credit against the taxes imposed by paragraph (1) an amount 
     equal to $500. Such credit shall not exceed the amount of 
     taxes imposed by paragraph (1) for which such person is 
     liable.
       (4) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding on October 1, 
     1994, articles to which any tax imposed by paragraph (1) 
     applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary shall prescribe 
     by regulations.
       (C) Time for payment.--The tax imposed by paragraph (1) 
     shall be paid on or before December 31, 1994.
       (5) Articles in foreign trade zones.--Notwithstanding the 
     Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
     other provision of law, any article which is located in a 
     foreign trade zone on October 1, 1994, shall be subject to 
     the tax imposed by paragraph (1) if--
       (A) internal revenue taxes have been determined, or customs 
     duties liquidated, with respect to such article before such 
     date pursuant to a request made under the 1st proviso of 
     section 3(a) of such Act, or
       (B) such article is held on such date under the supervision 
     of a customs officer pursuant to the 2d proviso of such 
     section 3(a).
       (6) Definitions.--For purposes of this subsection--
       (A) In general.--Terms used in this subsection which are 
     also used in section 5702 of the Internal Revenue Code of 
     1986 shall have the respective meanings such terms have in 
     such section, and the term ``tobacco products'' shall include 
     articles first subject to the tax imposed by section 5701 of 
     such Code by reason of the amendments made by this Act.
       (B) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or his delegate.
       (7) Controlled groups.--Rules similar to the rules of 
     section 5061(e)(3) of such Code shall apply for purposes of 
     this subsection.
       (8) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 5701 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply to the floor stocks taxes imposed by 
     paragraph (1), to the same extent as if such taxes were 
     imposed by such section 5701. The Secretary may treat any 
     person who bore the ultimate burden of the tax imposed by 
     paragraph (1) as the person to whom a credit or refund under 
     such provisions may be allowed or made.

     SEC. 3. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

       (a) Exemption for Exported Tobacco Products and Cigarette 
     Papers and Tubes To Apply Only to Articles Marked for 
     Export.--
       (1) Subsection (b) of section 5704 is amended by adding at 
     the end thereof the following new sentence: ``Tobacco 
     products and cigarette papers and tubes may not be 
     transferred or removed under this subsection unless such 
     products or papers and tubes bear such marks, labels, or 
     notices as the Secretary shall by regulations prescribe.''
       (2) Section 5761 is amended by redesignating subsections 
     (c) and (d) as subsections (d) and (e), respectively, and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Sale of Tobacco Products and Cigarette Papers and 
     Tubes for Export.--Except as provided in subsections (b) and 
     (d) of section 5704--
       ``(1) every person who sells, relands, or receives within 
     the jurisdiction of the United States any tobacco products or 
     cigarette papers or tubes which have been labeled or shipped 
     for exportation under this chapter,
       ``(2) every person who sells or receives such tobacco 
     products or cigarette papers or tubes, and
       ``(3) every person who aids or abets in such selling, 
     relanding, or receiving,

     shall, in addition to the tax and any other penalty provided 
     in this title, be liable for a penalty equal to the greater 
     of $1,000 or 5 times the amount of the tax imposed by this 
     chapter. All tobacco products and cigarette papers and tubes 
     relanded within the jurisdiction of the United States shall 
     be forfeited to the United States.''
       (3) Subsection (a) of section 5761 is amended by striking 
     ``subsection (b)'' and inserting ``subsection (b) or (c)''.
       (4) Subsection (d) of section 5761, as redesignated by 
     paragraph (2), is amended by striking ``The penalty imposed 
     by subsection (b)'' and inserting ``The penalties imposed by 
     subsections (b) and (c)''.
       (5)(A) Subpart F of chapter 52 is amended by adding at the 
     end thereof the following new section:

     ``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY 
                   EXPORTED TOBACCO PRODUCTS.

       ``(a) In General.--Tobacco products and cigarette papers 
     and tubes previously exported from the United States may be 
     imported or brought into the United States only as provided 
     in section 5704(d).
       ``(b) Cross Reference.--
       ``For penalty for the sale of cigarettes in the United 
     States which are labeled for export, see section 5761(d).''
       (B) The table of sections for subpart F of chapter 52 is 
     amended by adding at the end thereof the following new item:

``Sec. 5754. Restrictions on importation of previously exported tobacco 
              products.''

       (b) Importers Required To Be Qualified.--
       (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
     5763 (b) and (c) are each amended by inserting ``or 
     importer'' after ``manufacturer''.
       (2) The heading of subsection (b) of section 5763 is 
     amended by inserting ``Qualified Importers,'' after 
     ``Manufacturers,''.
       (3) The heading for subchapter B of chapter 52 is amended 
     by inserting ``and Importers'' after ``Manufacturers''.
       (4) The item relating to subchapter B in the table of 
     subchapters for chapter 52 is amended by inserting ``and 
     importers'' after ``manufacturers''.
       (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
     Manufacturers.--
       (1) Subsection (a) of section 5704 is amended--
       (A) by striking ``Employee Use or'' in the heading, and
       (B) by striking ``for use or consumption by employees or'' 
     in the text.
       (2) Subsection (e) of section 5723 is amended by striking 
     ``for use or consumption by their employees, or for 
     experimental purposes'' and inserting ``for experimental 
     purposes''.
       (d) Repeal of Tax-Exempt Sales to United States.--
     Subsection (b) of section 5704 is amended by striking ``and 
     manufacturers may similarly remove such articles for use of 
     the United States;''.
       (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
     Subsection (c) of section 5701 is amended by striking ``On 
     each book or set of cigarette papers containing more than 25 
     papers,'' and inserting ``On cigarette papers,''.
       (f) Storage of Tobacco Products.--Subsection (k) of section 
     5702 is amended by inserting ``under section 5704'' after 
     ``internal revenue bond''.
       (g) Authority To Prescribe Minimum Manufacturing Activity 
     Requirements.--Section 5712 is amended by striking ``or'' at 
     the end of paragraph (1), by redesignating paragraph (2) as 
     paragraph (3), and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) the activity proposed to be carried out at such 
     premises does not meet such minimum capacity or activity 
     requirements as the Secretary may prescribe, or''.
       ``(h) Limitation on Cover Over of Tax on Tobacco 
     Products.--Section 7652 is amended by adding at the end of 
     thereof the following new subsection:
       ``(h) Limitation on Cover Over of Tax on Tobacco 
     Products.--For purposes of this section, with respect to 
     taxes imposed under section 5701 or this section on any 
     tobacco product or cigarette paper or tube, the amount 
     covered into the treasuries of Puerto Rico and the Virgin 
     Islands shall not exceed the rate of tax under section 5701 
     in effect on the article on the day before the date of the 
     enactment of the Tobacco Tax Act of 1994.''
       ``(i) Effective Date.--The amendments made by this section 
     shall apply to articles removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after September 30, 1994.

     SEC. 4. IMPOSITION OF EXCISE TAX ON MANUFACTURE OF 
                   IMPORTATION OF ROLL-YOUR-OWN TOBACCO.

       ``(a) In General.--Section 5701 (relating to rate of tax) 
     is amended by redesignating subsection (g) as subsection (h) 
     and by inserting after subsection (f) the following new 
     subsection:
       ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
     manufactured in or imported into the United States, there 
     shall be imposed a tax of $29.34 per pound (and a 
     proportionate tax at the like rate on all fractional parts of 
     a pound).''
       (b) Roll-Your-Own Tobacco.--Section 5702 (relating to 
     definitions) is amended by adding at the end thereof the 
     following new subsection:
       ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.''
       (c) Technical Amendments.--
       (1) Subsection (c) of section 5702 is amended by striking 
     ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
     your-own tobacco''.
       (2) Subsection (d) of section 5702 is amended--
       (A) in the material preceding paragraph (1), by striking 
     ``or pipe tobacco'' and inserting ``pipe tobacco, or roll-
     your-own tobacco'', and
       (B) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) a person who produces cigars, cigarettes, smokeless 
     tobacco, pipe tobacco, or roll-your-own tobacco solely for 
     his own personal consumption or use, and''.
       (3) The chapter heading for chapter 52 is amended to read 
     as follows:

     ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
                   TUBES''.

       (4) The table of chapters for subtitle E is amended by 
     striking the item relating to chapter 52 and inserting the 
     following new item:

``Chapter 52. Tobacco products and cigarette papers and tubes.''

       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to roll-your-own tobacco removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after September 30, 1994.
       (2) Transitional rule.--Any person who--
       (A) on the date of the enactment of this Act is engaged in 
     business as a manufacturer of roll-your-own tobacco or as an 
     importer of tobacco products or cigarette papers and tubes, 
     and
       (B) before October 1, 1994, submits an application under 
     subchapter B of chapter 52 of such Code to engage in such 
     business,

     may, notwithstanding such subchapter B, continue to engage in 
     such business pending final action on such application. 
     Pending such final action, all provisions of such chapter 52 
     shall apply to such applicant in the same manner and to the 
     same extent as if such applicant were a holder of a permit 
     under such chapter 52 to engage in such business.

     SEC. 5. ESTABLISHMENT OF TOBACCO CONVERSION AND HEALTH 
                   EDUCATION TRUST FUND.

       (a) In General.--Subchapter A of chapter 98 (relating to 
     trust fund code) is amended by adding at the end thereof the 
     following new section:

     ``SEC. 9512. TOBACCO CONVERSION AND HEALTH EDUCATION TRUST 
                   FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Tobacco Conversion and Health Education Trust Fund', 
     consisting of such amounts as may be appropriated or credited 
     to such Trust Fund as provided in this section or section 
     9602(b).
       ``(b) Transfers to Trust Fund.--
       ``(1) In general.--There is hereby appropriated to the 
     Tobacco Conversion and Health Education Trust Fund amounts 
     equivalent to 3 percent (2 percent on and after October 1, 
     1999) of the net revenue received in the Treasury from the 
     1994 tobacco tax increases.
       ``(2) Net revenues.--For purposes of paragraph (1), the net 
     revenue received in the Treasury from the 1994 tobacco tax 
     increases is the amount estimated by the Secretary based on 
     the excess of--
       ``(A) the additional taxes received in the Treasury under 
     section 5701 by reason of the amendments made by the Tobacco 
     Health Tax and Agricultural Assistance Act of 1994 or under 
     section 2(i) of such Act, over
       ``(B) the decrease in the tax imposed by chapter 1 
     resulting from such taxes.
       ``(c) Tobacco Conversion Account.--
       ``(1) In general.--There is established in the Tobacco 
     Conversion and Health Education Trust Fund a separate account 
     to be known as the `Tobacco Conversion Account' consisting of 
     such amounts as may be transferred or credited to such 
     account as provided in this section or section 9602(b).
       ``(2) Transfers to account.--The Secretary of the Treasury 
     shall transfer to the Tobacco Conversion Account two-thirds 
     of the amounts appropriated to the Tobacco Conversion and 
     Health Education Trust Fund under subsection (b)(1) for 
     periods before October 1, 1999.
       ``(3) Expenditures from account.--Amounts in the Tobacco 
     Conversion Account shall be available, as provided in 
     appropriation Acts, for making expenditures for purposes of--
       ``(A) assisting farmers in converting from tobacco to other 
     crops, and
       ``(B) providing grants to communities, and persons involved 
     in the production or manufacture of tobacco or tobacco 
     products, that are adversely affected by the tax increases 
     contained in the Tobacco Health Tax and Agricultural 
     Assistance Act of 1994.

     The grants referred to in subparagraph (B) shall include 
     grants to assist in attracting nontobacco sources of income 
     and grants to farmers who retire tobacco allotments.
       ``(d) Health Education Account.--
       ``(1) In general.--There is established in the Tobacco 
     Conversion and Health Education Trust Fund a separate account 
     to be known as the `Health Education Account', consisting of 
     such amounts as may be transferred or credited to such 
     account as provided in this section or section 9602(b).
       ``(2) Transfers to account.--The Secretary of the Treasury 
     shall transfer to the Health Education Account one-third (100 
     percent on and after October 1, 1999) of the amounts 
     appropriated to the Tobacco Conversion and Health Education 
     Trust Fund under subsection (b)(1).
       ``(3) Expenditures from account.--Amounts in the Health 
     Education Account shall be available, as provided in 
     appropriation Acts, to the Secretary of Health and Human 
     Services for making expenditures to increase public awareness 
     of health risks, including tobacco use.''
       (b) Clerical Amendment.--The table of sections for such 
     subchapter A is amended by adding at the end thereof the 
     following new item:

``Sec. 9512. Tobacco Conversion and Health Education Trust Fund.''

                          ____________________