White House Rejects Tobacco Tax Provision

Cigarette makers will not be able to use a new tax break granted by the Republican Congress to help offset the cost of the pending tobacco settlement, White House officials said Friday.

The provision would have let the industry credit a new 15-cents-per-pack cigarette tax increase against its proposed out-of-court settlement with 39 states.

The mammoth settlement, which requires approval by Congress and the Clinton administration, would call for the industry to pay $368.5 billion over 25 years to settle tobacco litigation.

The tax break was tucked into the bill with the blessing of House Speaker Newt Gingrich (R-Ga.) and Senate Majority Leader Trent Lott (R-Miss.). It would allow the cigarette makers to reduce settlement payments by the estimated $50 billion to be raised by the 15-cent tax increase over the next 25 years.

“Our view is that the net liability that the companies will face as a result of the settlement will not be reduced” by the tax, said White House spokesman Mike McCurry.

Although the White House criticized the provision, Gingrich said administration officials knew it was in the bill.

“They signed off on it,” he said. “They were quite content with it.”

Lott has publicly recused himself from review of the tobacco settlement because his brother-in-law, private attorney Richard Scruggs, helped negotiate the deal.

Nonetheless, Lott said Friday that he thought the tax increase “should count as a credit against” settlement payments.

“As I understand, if [the tax] is on top of [the settlement], it could cause the whole thing to blow apart,” Lott said.

Meanwhile, jury selection began Friday in West Palm Beach, Fla., in a massive anti-tobacco lawsuit in which the state of Florida is seeking to recover the costs of treating sick smokers.

“For the first time, the people are going to get to hear . . . what tobacco has been covering up for years,” said Gov. Lawton Chiles, who along with Atty. Gen. Bob Butterworth showed up for the start of jury selection.

The Florida case was one of 39 state lawsuits that the industry hoped to resolve through the national settlement. But with congressional approval of the deal uncertain, states with the earliest trial dates are insisting on separate settlements or are going forward with their trials.

The Mississippi case, the first scheduled for trial, in early July, was settled almost at the eleventh hour when the industry agreed to pay the state $3.4 billion over the next 25 years. Negotiators for Florida and the tobacco companies have been discussing a settlement, but the two sides are said to be far apart. However, with jury selection expected to last a month, the parties could still reach an agreement before the first witnesses are called.