Struggling for Profits, It's Big Tobacco vs. Small Business

May 13th, 2011 11:34

The major tobacco companies fight small manufacturers to reach the new earnings for the Texas treasury.
The tobacco giants, which have to pay more than half a billion dollars to Texas budget annually as part of the Master Settlement Agreement, are eager to get the small cigarette makers to pay their fair share too. They are supporting an ordinance introduced to Texas House that would increase the tax on small tobacco companies to generate tens of millions of dollars – funds legislators admit are necessary to support state healthcare programs, which were cut to close the massive budget deficit.

However, the small cigarette manufacturers state they have faced such issues before in other states and Texas as well, and the regulation is an insolent attempt by nig tobacco to crack down competition. The little companies say they did not take part if settlement agreement, since they weren’t using misleading claims, as big tobacco, and thus, shouldn’t be subject to any additional taxes. The nation’s four major tobacco companies, charged with concealing evidence regarding the dangers related to smoking, reached a settlement agreement with then- Attorney General Daniel Morales, committing to pay Texas roughly $17 billion during 25 years – nearly $3 billion of it for smoking prevention and health care funds. Meanwhile, small tobacco companies, which then accounted for only a scruple of the industry revenues, were not covered by the lawsuit.

Some officials state that they have to be, and suggest the only way to balance the situation — and make them responsible for the health complications their cigarettes contribute to — is to levy extra tax on them. State Rep. John Zerwas, and Rep. Mark Shelton, authors of the bill; say the small manufacturer fee they have introduced would generate approximately $50 million during the next two years, a small drop in the ocean compared to several-billion budget deficit, but well enough to provide funding for healthcare programs. “Currently they small tobacco companies have a competitive advantage,” Zerwas stated. “I believe, we ought to be getting the payments from every cigarette maker.”

Big Tobacco profit

The leading tobacco companies across the nations agree and support the effort. David Sutton, senior communications manager for Philip Morris USA, which makes top-selling Marlboro, said that currently small cigarette makers comprise almost 10 percent of the domestic cigarette market, and they have to pay for the state expenses on health care produced by smoking. “What we’re discussing here is closing that loophole, in the taxation system,” Sutton added. Representatives of small cigarette makers, who say they account for 5 to 7 percent of the U.S cigarette market, not big tobacco’s estimated 10 percent — claim there’s no loophole, because in contrary to big tobacco, the attorney general never accused them of misleading smokers, and they never had to settle. They say that introducing a certain tax that applies only to small tobacco companies is not fair and even violates constitution.

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