WHY BUY QUOTAS ON TOBACCO?

The article “R.J. Reynolds protests Dole assessment plan” (Aug. 25) suggests that North Carolina Citizens for a Sound Economy (CSE) endorses the proposed buyout of the federal tobacco quota. However, CSE, a grassroots organization that advocates lower taxes, less government and more freedom, does not endorse the buyout.

Chuck Fuller, who is quoted in the story as a founding director of North Carolina CSE, is no longer affiliated with the organization. He is currently a political consultant. While he and some of his clients may endorse the proposal, CSE does not support the proposal, or its $13 billion price tag.

The plan has the federal government buying back quota rights, which currently permit farmers to grow certain quantities of tobacco. The money would be paid out over six years, and the amount received would be based on 2002 quota levels. The money would be collected from cigarette manufacturers, who would get this money from consumers by raising prices, as they did to cover the $246 billion settlement of 1998.

While some may prefer not to call it a tax, from the consumer’s perspective it would be hard to distinguish the higher price from a tax.

The plan calls for the elimination of government-set price guarantees, which CSE does support. Currently, farmers are paid for their tobacco based on rates set by Department of Agriculture predictions rather than market prices. This, along with quotas, distorts the tobacco market, creates a disjuncture between supply and demand, makes it difficult for American tobacco to compete with foreign product, and has created the current problems tobacco growers are facing.

The justification for buying quotas back, rather than just doing away with them, is that they are valuable. However, quotas are valuable only because without them, farmers are not allowed to produce tobacco.

It would cost the government nothing to simply do away with the quotas and let competition sort out who gets to produce how much tobacco.

Paul Beckner is president and CEO of Citizens for a Sound Economy, 1900 M St. NW, Suite 500, Washington, DC 20036.

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