A press release from some tobacco interests is excerpted below, followed by a discussion with press excerpts of legislation presented at the Virginia General Assembly related to the nicotine cartel.
    As noted above, the legislative session was extended because the legislature could not agree on a budget.  These are the same people who gave $36+ million to Philip Morris to encourage them to move their tobacco headquarters to Virginia, and are now granting a $6 million tax break for Philip Morris.

    Quoted in The Virginian-Pilot, May 6, 2004, Delegate Johnny Joannou (D) noted his disapproval "of a $6 million annual credit on cigarette exports that will benefit Philip Morris USA.  'We're raising taxes on everybody in the state, and here we are giving a tax credit,' he said."

EXCERPTS from Press Release of Virginia Leaf, Inc., March 15, 2004, headlined,
Tobacco Companies Prepare to Leave Virginia

RICHMOND, Va., March 15 /PRNewswire/ -- If the Virginia Senate prevails and the tax increase on tobacco is made law, tobacco companies are set to join in a mass exodus from Virginia to North Carolina.

... William Leachman, whose family sold its tobacco interests to Altria Group Inc, formerly the Philip Morris Companies, Inc. many years ago & now heads his own tobacco company, Virginia Leaf [said]  "I feel like I have been sounding the alarm, but either no one is listening or no one cares. I can't quite figure it out. The bottom line is tobacco companies have gotten Gov. Warner and Senator Chichester's message loud and clear: You are not wanted here anymore."

Leachman says the exodus from Virginia is already in motion and any increase in tobacco taxes will only accelerate it. Brown & Williamson is closing a recon plant south of Richmond due to its buyout by RJ Reynolds, but according to Leachman it is also due to the fact that Philip Morris is angry and transferring Marlboro production from Virginia to Cabarrus County, North Carolina, depriving the B&W plant of tobacco to reprocess.

"Philip Morris is angry and they have every right to be. They move their headquarters to Richmond and then the Governor & the Virginia Senate stab them in the back. If the tobacco taxes go up, it would not surprise me if PM closes the Bells Road facility within 3 years. Tobacco companies want to locate where the sales volume is, and with higher taxes in Virginia, the volume will be in North Carolina," says Leachman.

Other Virginia companies on the move to North Carolina include Universal which has opened a new facility in Rocky Mount and is encouraging employees to move there from Richmond, although its been a hard sell for the blue blooded tobacco processor, the world's largest.

Following the tobacco companies will be the hundreds of support firms: warehousing, packaging, printing, filter makers, trucking firms, trade unions, and their employees who will be faced with the choice of moving to North Carolina or losing their jobs. Altogether Leachman sees Virginia losing between 15,000 and 20,000 jobs from higher tobacco taxes in Virginia.

    1st one -- HOUSE BILL 1372 would allow Philip Morris to get away with murder. This bill was killed in the Virginia Senate's Courts of Justice Committee. Text and votes in the House are given below.

VIRGINIA residents -- please go to http://legis.state.va.us to see a list of state senators and delegates, or call your voter registrar (blue pages phone book) to see who your state senator and delegate is in the General Assembly.  This is STATE senator, not the federal ones in Congress.

    2nd one -- SENATE BILL 537 would reward Philip Morris for allowing a 2004 cigarette tax increase in Virginia by giving Philip Morris a $6 million tax break when exporting death, destruction, and disease to other nations.  This bill passed the Virginia Senate and a House committee, but was sent back from the House floor to that committee, most likely ending action on the bill this session.  It was carried over to the 2005 session.  March 3rd was the last day for action on revenue bills, and if supporters had been able to have the bill "reconsidered" on the floor of the House, it would have had to go to the Senate for them to agree to amendments which the House committee had added to it.  The Senate, however, had already adjourned for the day, so the bill was sent to the committee, which held it over to the 2005 session.
    The heart of the bill lives on, however, in budget negotiations in the Senate and possibly also in the House.  Please ask Governor Mark Warner to reject this tax break for Philip Morris.  You may call Governor Mark Warner at 804-786-2211 (press zero to reach a person) or write to him at his web site at www.governor.virginia.govbut you cannot send attachments.
    Further information, votes, and articles are given below.

    Note the News & Observer article excerpted below, March 2nd, especially the following quotation:

That may be one reason rumors are swirling in Richmond that the company is considering expanding its operations in North Carolina rather than in Virginia.
Lest we forget: In December, the reverse rumor made the rounds in Raleigh -- that the company might expand in Virginia rather than in Cabarrus County -- when Philip Morris was asking for the credit here.

The Virginia General Assembly session ends March 13, 2004, meeting again in April for the one day veto session.

Here is a copy of HB 1372 as it passed the Virginia House -- the original bill included alcoholic beverages as well.  The votes on the bill are given below.  The language and status of the bill is also given at http://legis.state.va.us.

HOUSE BILL NO. 1372
AMENDMENT IN THE NATURE OF A SUBSTITUTE
(Proposed by the House Committee for Courts of Justice on February 13, 2004)
(Patron Prior to Substitute--Delegate Janis)
A BILL to amend the Code of Virginia by adding in Article 3 of Chapter 3 of Title 8.01 a section numbered 8.01-44.6, relating to product liability; products containing open and obvious dangers.

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Article 3 of Chapter 3 of Title 8.01 a section numbered 8.01-44.6 as follows:

§ 8.01-44.6. Product liability; products containing open and obvious dangers.

A. In a product liability action, a manufacturer or seller shall not be liable for a design defect where the claim arises from an injury to a voluntary user of the product that is directly caused by an open and obvious danger of the product.

B. For purposes of this section:

1. Products with an open and obvious danger shall be limited to: (i) a food product made with sugar, butter, or a hydrogenated oil or trans-fat, (ii) tobacco, or (iii) a firearm; and

2. The term "product liability action" means any action for injury or death caused by a product except that the term does not include an action based on a manufacturing defect or breach of an express warranty.

VOTE in the Full House of Delegates:
(floor) 02/17/04 HOUSE: VOTE: PASSAGE (59-Y 39-N)

YEAS--Abbitt, Albo, Armstrong, Athey, Barlow, Bell, Black, Bryant, Byron, Callahan, Carrico, Cline, Cole, Cosgrove, Cox, Dillard, Dudley, Fralin, Frederick, Gear, Griffith, Hamilton, Hargrove, Hogan, Hugo, Hurt, Ingram, Janis, Johnson, Jones, S.C., Kilgore, Landes, Lewis, Lingamfelter, Louderback, Marrs, Marshall, D.W., Marshall, R.G., May, McDonnell, McDougle, Nixon, Nutter, O'Bannon, Oder, Orrock, Parrish, Pollard, Purkey, Reid, Saxman, Scott, E.T., Sherwood, Suit, Tata, Ware, R.L., Weatherholtz, Wright, Mr. Speaker--59.

NAYS--Alexander, Amundson, BaCote, Baskerville, Bland, Brink, Councill, Drake, Ebbin, Eisenberg, Howell, A.T., Hull, Joannou, Jones, D.C., Keister, Melvin, Miles, Moran, Morgan, Petersen, Phillips, Plum, Putney, Rapp, Reese, Rust, Scott, J.M., Shannon, Shuler, Sickles, Spruill, Stump, Van Landingham, Van Yahres, Ward, Wardrup, Ware, O., Watts, Welch--39.

NOT VOTING--Hall, McQuigg--2.
 

VOTE in the Senate Courts of Justice Committee, to Pass By Indefinitely, which means to kill the bill:
(HB1372) 03/08/04 Senate: Passed by indefinitely in C. J. (14-Y 1-N)

YEAS--Stolle, Saslaw, Marsh, Quayle, Norment, Howell, Lucas, Edwards, Reynolds, Mims, Puller, Rerras, Blevins, Cuccinelli--14.

NAYS--Obenshain--1.
 

THE SECOND BILL, SB 537 -- This is now apparently dead as a bill, but lives in the budget negotiations.
This bill passed the Virginia Senate and a House committee, but on March 3rd it was sent back from the House floor to that committee, most likely ending action on the bill this session.  It was carried over to the 2005 session.  March 3rd was the last day for action on revenue bills, and if supporters had been able to have the bill "reconsidered" on the floor of the House, it would have had to go to the Senate for them to agree to amendments which the House committee had added to it.  The Senate, however, had already adjourned for the day, so the bill was sent to the committee, which held it over to the 2005 session.
    The heart of the bill lives on, however, in budget negotiations in the Senate and possibly also in the House.  Please ask Governor Mark Warner to reject this tax break for Philip Morris.  You may call Governor Mark Warner at 804-786-2211 (press zero to reach a person) or write to him at his web site at www.governor.virginia.govbut you cannot send attachments.
    If the budget negotiations are not successful at incorporating this bill into the budget, then the deadline for committee action on the bill before the 2005 session is December 20th, 2004.

Virginia should be taxing Philip Morris (Altria) for every cigarette exported.  But instead, this bill/budget amendment would allow Philip Morris a $6 million tax break for exporting death, disease, and destruction to other nations.

Articles excerpted below on the $6 million tax break:
    March 8, The News Leader, Tobacco causes more than cancer
    March 3, The Manila Times, Increasing tobacco imports killing ...
    March 4, Daily Press, Tax credit for tobacco giant stalls ...
    March 4, Virginian-Pilot, House scales back Philip Morris tax cut
    March 4, Richmond Times-Dispatch, House denies tax break to Philip Morris ...
    March 2, News & Observer, Va. eyes tobacco tax credit
    March 1, News & Record, Panel Backs ...
    March 2, Richmond Times-Dispatch, Panel Seeks to Delay Tax Break ...
    February 25, News Virginian -- editorial, Tobacco Handout a Bribe ...
    February 21, Richmond Times-Dispatch, Senate Passes ...
 

EXCERPTS from The News Leader, in the Shenandoah, March 8, 2004, editorial headlined, Tobacco causes more than cancer

Fortunately, the House of Delegates has taken away a $6 million annual tax break the Senate had proposed to give Philip Morris USA.

Unfortunately, the measure is still technically alive; all the House has done is bury the bill in committee until next year, when it will be reconsidered.

That speaks volumes about the power that the tobacco giant wields over the entire General Assembly, not just the Senate. The only reason the House of Delegates voted to shelve the bill is that it would be too blatantly hypocritical to give Philip Morris a multi-million dollar tax break each year when the House's version of a budget was almost completely based on taking away tax credits from a host of Virginia businesses. That glaring an error might have gotten notice among voters, exposing the General Assembly for the lot of scam artists and greedheads they are.

The primary argument made to justify giving Philip Morris USA a great big cookie when everyone else's are being taken away was jobs, according to the bill's sponsor, Sen. Walter A. Stosch, R-Henrico. Philip Morris USA is also in Stosch's district. Stosch is also the recipient of tens of thousands of dollars from tobacco lobbyists, including those from Philip Morris USA and Altria, one of its aliases, according to data from the Virginia Public Access Project.

But Stosch isn't alone in being among those on the take from Philip Morris USA. Nearly every member of the legislature is, including our own senators and delegates.

The argument stated for giving Philip Morris USA a $6 million cookie each year is jobs. If that is the case, why does the House of Delegates, with the blessings of Dels. Saxman, Landes and Cline, want to take away tax credits from a raftload of Virginia businesses, including airlines, dry cleaners, and the shipping industry?

We don't think we need a detective to figure that one out, just as we don't need one to unravel the mystery of why Philip Morris USA's tax credit has been put on the shelf for the coming year. The House of Delegates, however, is hoping we won't notice.

EXCERPTS from The Manila Times, March 3, 2004, headlined Increasing tobacco imports killing local industry, writer Darwin G. Amojelar

After raking in $48.22 million in the foreign sales last year, the local tobacco sector improved earnings by 30.73 percent from $36.97 million in 2002. ... imports almost tripled and reached $163.43 million in 2003. Data from the National Tobacco
Administration (NTA) showed that the deficit last year was registered at $115.22 million, a trend that has been occurring since 2001, and reason for the farmers' dwindling earnings.

"If the manufacturers become so dependent on the imported tobacco, the product could kill the livelihood of the local farmers and even the industry," an NTA source said. The source said that most manufacturers have switched to imported tobacco because of the low cost and reliable availability of the product.  "The demand of the local farmers is to revert the tariff up to 50 percent to safeguard them and the tobacco industry," the source said.

Unable to give in completely to the clamor, the Department of Finance (DOF) only increased import taxes on tobacco leaves by between 7 to 10 percent.  The Bureau of Customs (BOC) is currently charging tobacco importers tariff rates of 3 percent on raw and 7 percent on cigarette grade. The government is said to be earning P20 to P22 billion annually from tobacco taxes.

Earlier reports noted that thousands of Northern Luzon farmers did not plant tobacco this season because of the many problems besetting the industry.  Aside from allowing the entry of cheap and imported cigarettes, government is said to have failed in supporting the tobacco farmers. In response to criticisms, the NTC blamed the cultivation of tobacco in salty farmlands, or lands with high chlorine content as the reason behind the decline in production.

NTA reported that in terms of volume, production declined to 78.24 million kilograms last year from 80 million kg. in 2002. The tobacco output in 2003 a­mounted to P3.03 billion at an average farmgate price of P35 a kilo.  Local tobacco is grown in 27 provinces, and provides employment for 57,498 local farmers working on 40,297 hectares. The industry covers four types of locally grown tobacco:  Virginia, Burley, Turkish (also referred to as aromatic), and native tobacco.

Virginia tobacco is the most dominant and constitutes about 58 percent of total production. Native and Burley tobacco represent 24 percent and 18 percent, res­pectively. These are purchased by the manufacturers of cigar and native cigarettes while regular foreign buyers include Japan, Spain, France, Tunisia, Dominican Republic, and Belgium.

EXCERPTS from The Daily Press, March 4, 2004, headlined, Tax credit for tobacco giant stalls, Export break held for 2005, writer Kimball Payne

Delegates voted 51-47 early in the afternoon to send the proposal back to the Finance Committee and carry it over until next year's legislative session. Lawmakers supporting the measure that would have offered Philip Morris a $6 million-a-year break on exported cigarettes scrambled to gather the votes to pass the bill.

"We had the votes here to revive it," said House Minority Leader Frank Hall, D-Richmond. "This had nothing to do with taxing, it had everything to do with retaining jobs."

By the time the bill was reconsidered on the House floor the Senate had adjourned for the day, which made any movement on the measure irrelevant. Wednesday was the final day either could make decisions on revenue bills, and the House version would have required the go-ahead from the Senate.

Supporters have said the bill is the only way Virginia can compete with neighboring states for the jobs, tax revenue and associated business that the tobacco behemoth produces each year.

North Carolina passed a yearly $6 million credit in December, and Georgia has a similar tax break.

"This represents a $650 million payroll in the state," said Del. Harry R. Purkey, R-Virginia Beach. "We are talking about tens of millions or even hundred of millions of dollars in tax revenue."

Del. Robert Orrock, R-Spotsylvania said the decision should be delayed because the tax credit wouldn't go into effect until 2006.

"There is no rush," said Orrock, who made the motion to send the bill back to the panel for study.

But Hall said that even with the delayed start it was important for Virginia to put the law into effect this year.

"What we're looking at is long-term corporate planning," he said.

After the bill was seemingly killed, Philip Morris officials remained optimistic the break could become a topic of discussion as the Senate and House begin budget negotiations.

"Nothing is over until it's over," said Philip Morris spokesman Brendan McCormick. "We're still going to urge senators, delegates and the governor to give this serious consideration."

Some delegates noted that the bonus was especially difficult to pass on to Philip Morris after they rammed a budget bill through the chamber last month that would tighten levies on shipbuilders, airlines and utility companies, among others.

By ending sales tax loopholes, the House leadership claimed the state could lose $520 million over the two-year budget period.

EXCERPTS from The Virginian-Pilot, March 4, 2004, headlined, House scales back Philip Morris tax cut, writer Christina Nuckols

The House voted 51-47 to return the bill, SB537, to a committee for study over the next year.

State senators likely will try to revive the tax preference as they negotiate with House leaders on a compromise budget over the next two weeks.

Advocates for the bill have touted it as a means to preserve and possibly create new jobs in Virginia. Many lawmakers, however, view it as a way to appease Philip Morris' concern over a separate Senate proposal to jack up the state tax on cigarettes from 2.5 cents to 35 cents per pack.

Forty percent of the cigarettes made in Virginia and 30 percent of those produced in North Carolina are shipped to other countries, said spokeswoman Jamie Drogin.

Sen. Walter A. Stosch, R-Henrico, sponsor of the tax break legislation, has argued that the credit could benefit Virginia because Philip Morris is due to renegotiate a contract with a Japanese manufacturing plant in April 2005. The plant makes all Philip Morris cigarettes sold in that country.

Company officials, however, have made no promises to shift more jobs to Virginia if they receive the tax credit.

Del. Robert D. Orrock Sr., R-Caroline, said he is concerned that Philip Morris could cut its Virginia work force by nearly half and still claim the tax credit under Stosch's bill.

"They left their options open," Orrock said.

But it appears unlikely that Philip Morris would significantly reduce its presence in Virginia. Drogin said the company is spending $300 million in its Virginia plant and $200 million in North Carolina to install high-speed equipment.

"These jobs can be shipped overseas where people work for $6 a day," said Del. Harry R. "Bob" Purkey, R-Virginia Beach. "We literally have to do everything we can to try to keep every job in the state."

Philip Morris has 6,800 workers in Virginia. The company is moving 270 high-paying jobs to Richmond this year as it relocates its headquarters from New York City.

Similar economic debates have occurred in North Carolina, which extended an existing tax credit for exported cigarettes in December.

Philip Morris will receive $78 million in tax breaks over 13 years under the North Carolina legislation. Tobacco rival R.J. Reynolds stands to gain $126 million over the same period.

Opponents of the North Carolina bill said Philip Morris made no commitment to add jobs in that state.

R.J. Reynolds has promised up to 800 jobs in Winston-Salem in return for the break, but lawmakers said the company laid off 1,700 workers last year.

"I really don't blame the tobacco companies for trying to con legislators for everything they can," said Paul Stam, a Republican state legislator in North Carolina.

"What's surprising is legislators vote for these things."

In Virginia, budget negotiators appear to be split over the tax credit.

"Why are we giving credits at a time when our revenues are short for schools and other public services?" said Del. Johnny S. Joannou, D-Portsmouth.

Del. Vincent F. Callahan Jr., chairman of the House Appropriations Committee, said the $6 million in lost revenue can be justified if it is adopted in conjunction with a 35-cent cigarette tax, which would generate $222.2 million in revenue annually.

The House has so far rejected cigarette tax hikes, but Speaker William J. Howell, R-Stafford, has said he is open to the idea.
 

 The roiling debate over a new state budget yesterday claimed a victim: a proposed $6 million tax break for Philip Morris USA.

The House, which has based much of its budget on erasing certain tax breaks for some businesses, dispatched the measure on a 51-47 vote. The state Senate had passed the bill, sponsored by Walter A. Stosch, R-Henrico, last month.

Opponents said privately it would be contradictory for the House to grant the tax credit to Philip Morris after voting to abolish sales-tax exemptions for other businesses.

Supporters tried to revive the measure near the end of the House floor session, but it was too late. Yesterday was the last day such bills could be considered this session.

The House's decision to bury the bill in a committee and consider it next year may not be the final word on the measure, though.

"We have it in our [Senate] budget," said Stosch, referring to the bill's potential revival during the coming showdown between the two chambers over the state budget.

Del. Robert D. Orrock Sr., R-Caroline, argued that the legislation should be returned to the Senate Finance Committee for further study, which he said would not harm the bill because the House had earlier amended it to not take effect until 2006.

"There's no rush for us to go forward," Orrock said.

In the negotiations set to begin, the House and Senate seem ready to raise state taxes on tobacco to help balance the budget.

A spokesman for Phillip Morris said the company would continue to fight for the credit. "This bill would be good for the commonwealth of Virginia," said Jamie Drogin, manager of media affairs.

It is a jobs bill, Drogin said, and the credit would help ensure that Virginia can compete against other states, especially North Carolina, to sell its product to companies that sell cigarettes overseas.

EXCERPTS from North Carolina's The News & Observer, March 2, 2004, headlined, Va. eyes tobacco tax credit, writer, Amy Gardner

North Carolina isn't the only state willing to extend big tax breaks to Big Tobacco -- despite the industry's diminishing economic importance.

But Tar Heel lawmakers may have missed an opportunity to get something in return for their investment: an increase in the cigarette excise tax.

This week, Virginia lawmakers are considering a bill almost identical to the one North Carolina legislators approved in December to extend a tax credit on cigarette exports to foreign countries and U.S. territories. In North Carolina, the 13-year extension is worth about $78 million for Philip Morris USA, $126 million for R.J. Reynolds Tobacco Co. and up to $2.6 million for Lorillard Tobacco Co.

In return for the break, Reynolds promised up to 800 new jobs for Winston-Salem. Philip Morris and Lorillard were served their piece of the pie for free.

In Virginia, however, some lawmakers who support the tax break are using it for cover to push through a major increase in the cigarette excise tax. Currently the custodians of the lowest rate in the nation -- 2.5 cents a pack -- Virginia lawmakers are considering increases ranging from 22.5 cents to 35 cents a pack.

Still, the export tax credit is far from a done deal in Virginia's Republican-controlled General Assembly. Although the bill sailed out of the state Senate last week, the House of Delegates has shown a greater reluctance to approve the perk, which would apply only to Philip Morris.

That may be one reason rumors are swirling in Richmond that the company is considering expanding its operations in North Carolina rather than in Virginia.

Lest we forget: In December, the reverse rumor made the rounds in Raleigh -- that the company might expand in Virginia rather than in Cabarrus County -- when Philip Morris was asking for the credit here.

In part to ensure local investment, Cabarrus County commissioners have assembled a local tax break worth as much as $1.5 million over three years. Mum's the word, meanwhile, on whether the state Department of Commerce is putting together an incentives package to lure more Philip Morris production to Cabarrus.

EXCERPTS from The News and Record, Greensboro, NC, March 1, 2004, headlined, Panel backs Philip Morris tax break to compete with NC, writer, Larry O'Dell, Associated Press Writer

RICHMOND, Va. (AP) A legislative committee that voted to eliminate sales tax exemptions for several major industries endorsed a $6 million tax break for tobacco giant Philip Morris.

The House Finance Committee voted 20-5 Monday to support Sen. Walter Stosch's bill to give Richmond-based Philip Morris a corporate tax credit on cigarettes it exports.

Stosch, R-Henrico, said the measure is necessary to compete with North Carolina, which already offers a similar tax credit. Stosch and other supporters of the bill said it will help preserve Virginia jobs.

"It appears to me that the request is a small price to pay for the benefits Virginia gets from the tobacco industry," said Del. Joseph Johnson, D-Washington.

The bill's supporters also said it will help Virginia compete for tobacco production that Philip Morris expects to move from Japan to the United States after a contract expires next year.

"This is a vital, knockdown, drag-out battle for survival," said Del. Harry Purkey, R-Virginia Beach.

Del. Mitchell Van Yahres said he was worried that Virginia and North Carolina would get into a "bidding war" for tobacco jobs. He also opposed the bill for public health reasons.

"This goes against my philosophy of trying to cut down on smoking," said Van Yahres, D-Charlottesville.

"This is not a health issue," said Del. Franklin P. Hall, D-Richmond. "These jobs are going to go someplace."

The committee amended the bill to delay its effective date until 2006 and to end the tax break, which would be capped at $6 million annually, 10 years later. Stosch did not object to the amendments.

EXCERPTS from The Richmond Times-Dispatch, March 2, 2004, headlined, Panel seeks to delay tax break,
Philip Morris credit now would start in 2006, end in 10 years, writer, Michael Hardy

A Senate-passed tax break for Philip Morris USA would not begin until 2006, the House Finance Committee decided yesterday.

Voting 15-5, the GOP-dominated panel postponed the maximum $6 million-a-year tax credit and limited the duration of the break to 10 years. It would be based on the number of cigarettes produced by the company's local manufacturing plant that get exported.

In effect, the panel agreed that the legislation, sponsored by Sen. Walter A. Stosch, R-Henrico, was important for the company, which recently moved to Henrico County from New York City, and is a significant job creator for the region and the state.

But the committee's majority, after agreeing to implement the break two years later than the Senate, said that the postponement was critical at a time when the House had stripped more than $500 million in sales-tax exemptions from a number of Virginia businesses.

During the hourlong committee hearing yesterday, Stosch, as well as representatives from the cigarette-making giant and the Virginia AFL-CIO, argued that the measure would help make Virginia competitive with North Carolina, which has passed similar tax-break legislation. Georgia also has passed such a break.

Without the legislation, proponents said, Philip Morris could decide to produce more cigarettes in North Carolina for sales overseas, a decision that would result in the loss of many high-paying jobs in Virginia.

But others argued that the proposal should be delayed and studied within the context of tax reform.

"It's premature," declared Del. Mitchell Van Yahres, D-Charlottesville. "It's putting the camel's nose under the tent [and invites] a bidding war with North Carolina. The $6 million is peanuts to Philip Morris."

The legislation could face stiffer opposition when it is considered by the full House of Delegates, perhaps later this week.

EXCERPTS from The News Virginian, February 25, 2004, headlined, Tobacco handout a bribe
-- Corporate welfare ill timed in light of proposed massive tax increase, writer, J. Todd Foster, Managing Editor

The Virginia Senate's vote to give tobacco giant Philip Morris a $6 million annual tax break is tantamount to bribery.

While passing a two-year budget that calls for nearly $4 billion in tax increases, senators - saying they wanted to protect jobs and the commonwealth's top cash crop - could not have made a more ill-timed contribution to corporate welfare.

Philip Morris is a heavyweight lobbyist and, over the last five elections, has contributed at least $1.6 million to state legislators nationwide, according to The Washington Post.

The timing of the tax break also is curious given Philip Morris' move last years of its headquarters from New York to Richmond.

Sen. Yvonne B. Miller, D-Norfolk, called the tax credit a "kickback" and said: "We're talking about a company that sells an unhealthy product. Our values are twisted. It's crazy."

While the Senate did agree to increase the tax on a pack of smokes to 20 cents by July and 35 cents by next year. But that move was offset, in principle at least, by the $6 million annual handout.

We agree with dissenting Republican Sen. William C. Mims, R-Loudoun, who said, "This is bad policy, and from the standpoint of trying to explain it to our constituents, it can't be reasonably explained."

EXCERPTS below from The Richmond Times-Dispatch, February 21, 2004, headlined, Senate passes tax increases; It then backs a break to help Philip Morris save up to $6 million; writer, Tyler Whitley.

The tax credit for Philip Morris, which could amount to as much as $6 million annually, spurred vigorous debate. Sen. Richard L. Saslaw, D-Fairfax, said the tax credit would just about cover the $7 million common stock bonus given to Philip Morris' chief executive officer.

Sen. Yvonne B. Miller, D-Norfolk, said the credit smelled of an "after-the-fact" kickback to Philip Morris USA for relocating its corporate headquarters from New York to Richmond.

And she wondered about using a tax credit to encourage exports to foreign countries when the United States is trying to discourage smoking because it affects health.

But the main sponsor, Sen. Walter A. Stosch, R-Henrico, said North Carolina has a similar tax credit and Philip Morris could easily move its production of cigarettes for export to a plant there.

"It's about jobs," said Stosch, who had not voted on the cigarette-tax bill because he is a board member of Universal Corp., a Richmond-based tobacco processing company.

Sen. Benjamin J. Lambert III, D-Richmond, said Philip Morris and other Virginia corporations helped save Virginia Union University several years ago when it was about to go under financially.

Sen. Charles R. Hawkins, R-Pittsylvania, whose district includes lots of tobacco farmers, said the tobacco industry has already lost too many jobs.

"Not everybody is going to wear a white lab coat, drive a BMW and eat quiche," he said. "This is about working families who want to send their kids to college."

The Senate passed the tax credit 22-17.

SB 537 Income tax, corporate; credit against cigarettes manufactured and exported to a foreign country.
Patron - Walter A. Stosch
Summary as introduced:
Corporate income tax; credit for cigarettes manufactured and exported. Provides a credit against corporate income taxes for the number of cigarettes manufactured by a corporation, which are also exported by the corporation to a foreign country. The bill establishes taxable year 2003 as a base year for the number of cigarettes exported. In future taxable years, the credit is computed by comparing the actual number of cigarettes exported by the manufacturer in the relevant taxable year with the number of cigarettes it exported in taxable year 2003. The credit per cigarette will vary based upon this comparison. No credit will be granted if the number of cigarettes exported is less than 50 percent of the number exported in taxable year 2003. In cases where the number of cigarettes exported in a taxable year is 50 percent or more of the number exported in 2003, the credit for the relevant taxable year will range from $.20 per 1,000 cigarettes exported up to $.40 per 1,000 cigarettes exported. The maximum allowable credit in any taxable year is $6 million.

SENATE VOTES on SB 537:
(floor vote) 02/20/04 Senate: VOTE: PASSAGE (22-Y 17-N)

YEAS--Blevins, Bolling, Chichester, Colgan, Deeds, Edwards, Hanger, Hawkins, Houck, Lambert, Lucas, Martin, Miller, Newman, Norment, Potts, Rerras, Ruff, Stosch, Wagner, Wampler, Watkins--22.

NAYS--Bell, Cuccinelli, Devolites, Howell, Locke, Mims, Obenshain, O'Brien, Puckett, Puller, Quayle, Reynolds, Saslaw, Stolle, Ticer, Whipple, Williams--17.

NOT VOTING--Marsh--1.

HOUSE FINANCE COMMITTEE VOTES on SB 537 -- to send the bill to the full House for a vote:
03/01/04 House: Reported from Finance with substitute (16-Y 5-N)

YEAS--Parrish, Purkey, Louderback, Ware, R.L., Welch, Nixon, Lingamfelter, Cole, O'Bannon, Janis, Hugo, Johnson, Melvin, Watts, Hall, Lewis--16.

NAYS--Orrock, Drake, Byron, Van Yahres, Shannon--5.

NOT VOTING--Hull--1.

YEAS--Albo, Alexander, Bell, Black, Bryant, Byron, Cline, Cole, Cosgrove, Cox, Dillard, Drake, Dudley, Fralin, Frederick, Gear, Griffith, Hamilton, Hogan, Hugo, Johnson, Jones, S.C., Kilgore, Landes, Lingamfelter, Louderback, Marrs, Marshall, D.W., Marshall, R.G., May, McDougle, McQuigg, Morgan, Nixon, Nutter, Orrock, Petersen, Plum, Putney, Rust, Saxman, Scott, E.T., Shannon, Sherwood, Sickles, Suit, Tata, Van Yahres, Wardrup, Weatherholtz, Mr. Speaker--51.

NAYS--Abbitt, Amundson, Armstrong, Athey, BaCote, Barlow, Baskerville, Bland, Brink, Callahan, Carrico, Councill, Ebbin, Eisenberg, Hall, Hargrove, Howell, A.T., Hull, Hurt, Ingram, Janis, Joannou, Jones, D.C., Keister, Lewis, McDonnell, Melvin, Miles, Moran, O'Bannon, Oder, Parrish, Phillips, Pollard, Purkey, Reid, Scott, J.M., Shuler, Spruill, Stump, Van Landingham, Ward, Ware, O., Ware, R.L., Watts, Welch, Wright--47.

NOT VOTING--Rapp, Reese--2.

See news articles above indicating the language of the bill is being considered in the budget negotiations.