The stall involves a major brand that will benefit from the bill and opposition to new taxes by House Republicans.
By JENNIFER LIBERTO
Published March 19, 2004
TALLAHASSEE - A proposed tax on small cigarettemakers has stumbled in the Senate, mostly because one company stands to make a windfall from the legislation.
"The tobacco tax bill has taken a turn for the worse," said Senate President Jim King, R-Jacksonville. "We're having a lot of doubting Thomases."
While the bill has not been taken up by a single House committee, King has fast-tracked the legislation, which would impose a 50-cent tax on most off-brand cigarettes, which have enjoyed a six-fold increase in sales in recent years.
The tax affects all but the nation's largest five cigarettemakers that settled with Florida's attorney general. Liggett Group, Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard agreed to pay Florida $11.3-billion over 25 years.
But Liggett, which specializes in off-brand cigarettes like Pyramid and Liggett Select, was the first tobacco company to settle with Florida in 1996. As a result, it negotiated a deal that allowed it to pay relatively little.
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In 2003, Florida collected $198.3-million from Philip Morris, $85.9-million from R.J. Reynolds, $41.7-million from Brown & Williamson and $38-million from Lorillard, according to the Attorney General's Office.
In contrast, Liggett paid Florida $384,295 between 1996 and 1998. It has paid nothing since.
The company's top business strategy is to capitalize on "the favorable treatment Liggett has received under the settlement agreements." The Senate bill fits that strategy by taxing its off-brand competitors.
Some lawmakers say Liggett deserves the market advantage it enjoys.
"There was a conspiracy of silence in the industry," said Sen. Skip Campbell, D-Fort Lauderdale. "I think it's fair because we would never have had what we got without the information that Liggett gave to the nation."
Liggett is considered a deep-discount cigarettemaker, said analyst Donald Trott of Jefferies and Company in New York. If other off-brand cigarettes pay the tax, Liggett stands to reap the rewards in Florida, its competitors argue.
"Obviously Liggett is the driving force behind this; they understand that they have the most to gain," said Yolanda Nader, chief financial officer of Dosal, which like other smaller cigarettemakers gained market share since the settlement agreements took effect. Dosal also makes payments to other states, in accordance with settlement agreements.
While one of the top national tobacco companies, Liggett has a relatively small presence in Florida, with 1.1 percent of the market, said Liggett lobbyist Greg Turbeville. Dosal has gained 7.8 percent of the state market in 2003, he said.
"The gains by the company wouldn't be great, compared to what it could be if we were a major brand," Turbeville said.
But Liggett is not the only company pushing the legislation. Lorrilard and Brown & Williamson also support the tax. The two biggest tobacco companies, R.J. Reynolds and Philip Morris, are neutral.
Sen. Paula Dockery, R-Lakeland, and the bill's sponsor, said the legislation is on hold until she can work out a compromise with House Republicans, who oppose new taxes.
"We have some concerns that it may not be able to get through the House in its current form, and we're meeting with various individuals in hopes that there is some compromise that can be made," Dockery said Thursday.
- Staff writer Alisa Ulferts contributed to this report.
