Late Provision Steers Taxes to Tobacco Settlements

WASHINGTON — The money raised by a new cigarette tax would offset anything tobacco companies would otherwise have to pay to settle health claims against the industry, under a provision inserted into the tax bill at the last minute.

The tax money, designed to pay for children’s health, would be credited toward any settlement of claims. The agreement Congress is considering calls for the industry to pay $368 billion over 25 years to settle 40 state lawsuits.

The Senate upheld the provision Thursday, 78 to 22, after Sen. Richard Durbin (D-Ill.) moved to strip it from the bill. He said over 25 years the cigarette tax would raise $50 billion, which tobacco companies would not have to spend on the anti-smoking initiatives they have promised under the agreement.

“It just gave them a $50-billion windfall,” Durbin said.

“This is a clear indication that the tobacco lobby is strong. It’s powerful,” said Sen. Edward M. Kennedy (D-Mass.), who said the provision was slipped into the massive tax bill behind closed doors. “The tobacco lobby cannot stand the light of day.”

The tobacco industry’s spokesman on the settlement had no immediate comment.

White House Press Secretary Mike McCurry said Thursday that he was not familiar with the matter, and officials at the Treasury and Health and Human Services departments had no comment.

Sen. William V. Roth Jr. (R-Del.), chairman of the Senate Finance Committee, said removing the provision would create problems because the Senate version of the measure would differ from the House version.

“I do not believe we should delay this historic opportunity that is within our grasp,” Roth said. Durbin allowed that most senators “want to go home” for their August recess.

Sen. Daniel Patrick Moynihan (D-N.Y.) voted against removing the measure, calling it “a meaningless provision with no binding effect.”

But Durbin said the tobacco companies will argue that Congress is on record in support of the credit and that will make it tougher for them to back out.

“They don’t do these things for nothing,” he said. “They do them for their financial advantage.”

Kennedy originally pushed for a 43-cent tobacco tax to finance a new children’s health program. That was cut in half by a Senate committee and cut again in the final deal. The bill now calls for a 10-cent increase in 2000 and five cents more in 2002.

It’s expected to raise about $5 billion over five years. The children’s health program will cost $24 billion over that same period, with some $21 billion coming from the Treasury.