These prices were mandated by a formula in the law. The economic stability that was desired and expected from the tobacco support program was not achieved. In 1982 there were about 180,000farms producing tobacco. 106-224 , P.L. These three sources of financial assistance, rather than income from the sale of tobacco, are the primary reason active producers were able to pay higher rental rates to absentee quota owners as theybid against each other for their share of a declining national tobacco quota. Active producers, not just absentee landlords, also would have received quota buyout payments under all of the legislative proposals that were offered. This framework for a quota buyout, of licensed future production and continued price support, was developed by the President's Commission on Improving Economic Opportunity in CommunitiesDependent on Tobacco Production While Protecting Public Health. This bill was similar to the McConnell bill in most respects. However, S. 1490 included somecommunity development assistance that was not present in H.R. to quota owners plus $4/lb. However, all of the legislative proposals described in this reportincluded an assessment on manufacturers and importers of tobacco products, or the use of U.S.Treasury funds, rather than an increase in excise taxes on cigarettes. One tobacco manufacturer, Philip Morris, stated its willingness to help pay for a tobaccobuyout program. (13) Philip Morris was the only major manufacturer known to support FDA regulation or a quota buyout. (See identical bills H.R. 4433 and S. 2461 ). Doubts about whether strong divisions in Congress over proposed FDA regulatory authority could be overcome encouraged sponsors of H.R. 4033 (Jenkins; March 25, 2004) toseek about $9.6 billion in funding out of the U.S. Treasury, rather than from assessments onmanufacturers. The bill was cosponsored by most supporters of the so-called House consensus bill. The Jenkins bill also was included as Title VIIin the House-passed H.R. Following the lead of the House in using the tax bill as the legislative vehicle for the tobacco quota buyout, the Senate retrieved its previously adopted S. 1637 , the Jumpstart OurBusiness Strength (JOBS) Act, and amended it by attaching the slightly modified McConnell buyoutbill ( S. 1490 ) and the DeWine-Kennedy FDA tobacco product regulation authority( S. 2461 ). Conferees took up the tax legislation (the differing House and Senate versions of H.R. 4520 ) on October 5, 2004. The Chairman's mark for the conference committeeincluded tobacco quota buyout provisions (Title VI). Like the House version of H.R. The Chairman's mark, like both the House and Senate proposals, eliminated tobacco marketing quotas, acreage allotments, and nonrecourse loan price support authority. Similarly, the roughly 57,000 active producers would be paid $3 per pound on their 2002effective marketing quotas (totaling about $2.9 billion). Nearly all of the active producers also werequota owners, and they would get both payments on that portion of the effective quota they alsoowned. CRS Report RL31528, Tobacco Quota Buyout Proposals in the 107th Congress .
On October 22, 2004, the tobacco quota buyout was signed into law. Title VI of P.L. 108-357 is known as the Fair and Equitable Tobacco Reform Act of 2004. This legislation eliminated thetobacco quota program and compensated active producers and absentee quota owners for the lostvalue. The concept of a quota buyout was not new, but it gained political momentum after beingendorsed in the final report of a presidential commission on tobacco, Tobacco at a Crossroads, ACall for Action (May 14, 2001), and by the leading U.S. cigarette manufacturer, Philip Morris. Several quota bills were introduced in the 107th Congress without subsequent legislative action. Supporters of a buyout and legislative sponsors again put the proposal on the legislative agenda ofthe 108th Congress by introducing several differing bills.
Eventually, H.R. 4033 (Jenkins; March 25, 2004) and S. 1490 (McConnell; July 30, 2003) were attached to unrelated tax legislation ( H.R. 4520 in theHouse and S. 1637 in the Senate), which was taken up by conferees on October 5, 2004. These bills proposed to eliminate tobacco quotas and the price support loan program. Ascompensation, quota owners (including absentee owners) and active producers would receive lumpsum payments. Active producers were to receive $7 per pound in the House version or $8 per poundin the Senate version for the quota they owned in 2002, plus $3 per pound in the House version or$4 per pound in the Senate version for the quantity of tobacco they were allowed to produce. Mostproducers grow more than the quota they own because they lease quota from other landlords. Theabsentee landlords also were be paid for the quota they owned in 2002.
The estimated cost of the House and Senate bills was, respectively, $9.6 billion and $12 billion. The source of funding for the two bills differed, coming from the federal treasury in the House billand from tobacco product manufacturers and importers in the Senate bill.
Many public health advocates and Philip Morris strongly supported a tobacco quota buyout accompanied by new legal authority for the Food and Drug Administration (FDA) to regulatetobacco products. The proposed FDA authority was included in identical bills in the House andSenate ( H.R. 4433 , Davis-Waxman; and S. 2461 , DeWine-Kennedy). TheFDA authority also was included in the Senate version of the tax bill, but not in the House version,where there was strong opposition.
The Chairman's mark for the conference committee on H.R. 4520 included a tobacco title (Title VI) that closely matched the House version, H.R. 4033 , with quotabuyout payments of $7 per pound and active producer payments of $3 per pound. Under theconference agreement, funding would come from assessments on tobacco product manufacturers andimporters (as proposed in S. 1490 ). FDA regulatory authority over tobacco products,however, was not included.
This report is intended to serve as a history and evolution of the tobacco buyout. It will not be updated.