[Congressional Record Volume 146, Number 155 (Friday, December 15, 2000)]
[Senate]
[Pages S11927-S11930]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN:
  S. 3285. A bill to amend the Internal Revenue Code of 1986 to exclude 
tobacco products from qualifying foreign trade property in the 
treatment of extraterritorial income; to the Committee on Finance.


               STOP GIVING SPECIAL TAX BREAKS TO TOBACCO

  Mr. DURBIN. Mr. President, today I am introducing legislation to 
exclude tobacco from the Extraterritorial Income Exclusion tax benefit, 
which has replaced the Foreign Sales Corporation tax benefit.
  This tax provision provides tax benefits to a variety of companies, 
including many in Illinois, and I understand how important it is to 
them. But one product should be clearly, in law, excluded from this 
benefit, and it is the one product which kills its user when used 
according to the manufacturer's directions--tobacco.
  The FSC replacement law already contains several exclusions from its 
benefits. Oil, gas, and other primary products are excluded to help 
ensure that natural resources in the United States are not depleted.
  Unprocessed timber is excluded in order to ensure no displacement of 
U.S. jobs.
  The law also excludes certain products in order to promote congruence 
with other federal government policies. For example, there are 
exclusions relating to items subject to the Export Administration Act, 
which prohibits or severely restricts export of certain civilian goods 
and technology that have military applications. Similarly, we should 
not be subsidizing tobacco products that are sold overseas while at the 
same time trying to cut smoking rates in the U.S. Our trade and health 
priorities should be on the same page.
  The biggest tobacco companies in America currently benefit handsomely 
from the Foreign Sales Corporation tax break and will benefit from the 
Extraterritorial Income Exclusion tax break. The latest available data 
from the Statistics of Income Division at the Internal Revenue Service 
show tobacco products sold through 10 Foreign Sales Corporations for 
domestic tobacco manufacturers accounted for about $100 million in lost 
tax revenue in 1996. There is no justification for compelling American 
taxpayers to support a $100 million tax subsidy annually for the 
benefit of U.S. tobacco companies.
  Since 1990, while Philip Morris's sales have grown minimally in the 
U.S., they have grown by 80 percent abroad. Smoking currently causes 
more than 3.5 million deaths each year throughout the world. Within 20 
years, that number is expected to rise to 10 million, with 70 percent 
of all deaths from smoking occurring in developing countries. Tobacco 
will soon be the leading cause of disease and premature death 
worldwide--surpassing communicable diseases such as AIDS, malaria, and 
tuberculosis.
  American taxpayers should not be partners in this export of disease 
and death where the result is more children around the globe smoking 
and more people getting sick and dying.
  While it is true that tobacco companies are not receiving any special 
treatment that other corporations don't get under the old FSC law or 
its recent replacement, we must remember that tobacco companies are not 
like any other company. Internal tobacco industry documents have 
established that, starting as early as the 1950s, cigarette companies 
intentionally withheld information about smoking, including scientific 
research about its risks; made false and misleading statements about 
the harm of tobacco products; attacked research findings despite 
knowing that the research was valid; failed to take steps to make their 
products safer; and marketed their products to children and youth.
  As a matter of fact, Philip Morris recently posted a statement on its 
website agreeing that smoking is harmful to your health and that there 
is no such thing as a safe or safer cigarette. The statement says, ``We 
agree with the overwhelming medical and scientific consensus that 
cigarette smoking causes lung cancer, heart disease, emphysema and 
other serious diseases in smokers. Smokers are far more likely to 
develop serious diseases, like lung cancer, than non-smokers. There is 
no `safe' cigarette. These are and have been the messages of public 
health authorities worldwide. Smokers and potential smokers should rely 
on these messages in making all smoking-related decisions.''
  It is about time that the tobacco companies faced up to the fact that 
their products are harmful and highly addictive. In the U.S. alone, 
smoking causes more than 400,000 deaths and costs more than $72 billion 
in health care costs every year.
  We should not be subsidizing such an inherently dangerous product 
that is being promoted and marketed so irresponsibly here and around 
the world. With its devastating health effects, tobacco should not 
enjoy the same taxpayer-subsidized federal assistance as other 
products.
  It's time to take another step toward bringing our nation's tax and 
trade priorities in line with our clear understanding of the health 
dangers of tobacco. My legislation simply adds one additional category 
to the list of products excluded from the special tax treatment in the 
FSC Repeal and Extraterritorial Income Exclusion Act of 2000, which was 
recently signed into law by the President. It shifts tobacco from being 
promoted by this tax benefit to being excluded from this tax benefit.
  In my legislation, tobacco is defined as it is defined in Section 
5702(c) of the Internal Revenue Code, so it includes cigars, 
cigarettes, smokeless tobacco, and pipe tobacco. It does not apply to 
raw tobacco, so this legislation will not affect tobacco farmers' 
ability to sell their product abroad.
  Is it fair to exclude a legal product from this tax benefit? 
Absolutely! Tobacco companies spend over $5 billion each year--that's 
nearly $14 million every day--in the U.S. alone to promote their 
products in order to replace the thousands of customers who either die 
or quit using tobacco products each day. In other countries, U.S. 
tobacco companies advertise their products near schools and in video-
game arcades. They also use children in other countries to peddle their 
products. Street lights with the Camel logo have been installed in 
Bucharest, Romania. Toy cars with the Camel insignia are sold to 
children in Buenos Aires. Children's tatoos sporting the Salem logo are 
distributed in Hong Kong. Arcade games in the Philippines are plastered 
with the Marlboro label.
  I urge my colleagues to send a message to U.S. tobacco companies as 
well as the next Administration to take the logical next step and make 
changes in the way tobacco products are sold and regulated to reflect 
the magnitude of the danger.
  The tobacco prevention agenda has been stalled in this Congress for 
far too

[[Page S11930]]

long. Let's work together, in a bipartisan fashion, to stop marketing 
tobacco products to children, to regulate tobacco products in a 
sensible way, and to adopt larger and clearer warning labels 
commensurate with the risks of tobacco products. Let's take a close 
look at all the forms of tobacco, including the new fad of bidis and 
the resurgent use of cigars. They all have addictive levels of nicotine 
and deadly levels of carcinogens. It's time to put people's health 
ahead of tobacco company profits.
  Mr. President, I urge my colleagues to join me in cosponsoring this 
important legislation, to end the contradiction of using the tax code 
to continue to enrich U.S. tobacco companies, which export products 
that addict children abroad to nicotine and push them down a path to 
disease and death.
  I ask unanimous consent that a copy of the legislation be printed in 
the Congressional Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 3285

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

     SECTION 1. EXCLUSION OF TOBACCO PRODUCTS FROM QUALIFYING 
                   FOREIGN TRADE PROPERTY.

       (a) In General.--Section 943(a)(3) of the Internal Revenue 
     Code of 1986 (relating to excluded property) is amended by 
     striking ``or'' at the end of subparagraph (D), by striking 
     the period at the end of subparagraph (E) and inserting ``, 
     and'', and by inserting after subparagraph (E) the following 
     new subparagraph:
       ``(F) any tobacco products (as defined in section 
     5702(c)).''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendment made by 
     section 3(b) of the FSC Repeal and Extraterritorial Income 
     Exclusion Act of 2000.
                                 ______