 Plus: European approval of Altadis sale to Imperial will take longer
Los Angeles, October 3 – Media reports circulating late Tuesday indicated that U.S. President George W. Bush would veto a controversial bill extending and greatly expanding the State Children’s Health Insurance Program (SCHIP) on Wednesday.
The bill would have more-than-doubled spending for the program, allowing states to open the doors for such coverage to almost any child. Designed specifically for children of low-income families, the state of New York has already set the stage to allow children of families with incomes of up to $83,000 to get coverage!
Funding for the bill would be entirely on the backs of smokers, with federal cigarette taxes to be raised 156 percent from 39 cents per pack to $1 with similar raises on other tobacco products. For large cigars, the tax would increase from 20.719 percent of the manufacturer’s price to more than 53 percent, but the killer is a 6,154 percent increase in the tax cap on cigars, from 4.875 cents per cigar to $3.00 per cigar.
Similar increases in the bill on tax rates for little cigars, pipe tobacco and roll-your-own tobacco could, in the estimate of some in the tobacco industry, ruin the market for those products.
The Democrat-controlled Congress will try to override the veto, of course. The bill passed by enough votes in the Senate to obtain more than a two-thirds majority, but failed to reach that level by about two dozen votes in the House of Representatives. According to the Associated Press, House Minority Whip Roy Blunt (R-Missouri) “said he was ‘absolutely confident’ the House would sustain Bush's veto.”
Senate Minority Whip Trent Lott (R-Mississippi) told the AP that Congress should be able to reach a compromise with Bush once he vetoes the bill. “We can do this,” Lott said, “but we should not allow it to be expanded to higher and higher income levels, and to adults. This is about poor children. But we can work it out. And I hope after we get through the politics of the next couple of days, we can get down to serious business.”
The AP also noted the comments of White House press secretary Dana Perino, who said the tax would hit the poor hardest, because smokers tend to fall in the lower-income level. “It's just completely irresponsible. Stop the madness on Capitol Hill.”
The authorization for the SCHIP program, which began in 1997, expired on September 30. However, funding for a temporary continuation of the program was included in a continuing resolution passed to allow the government to continue functioning since the Congress has not competed the appropriations bills for the next fiscal year. Thus, the President and the Congress have some amount of time to work out a compromise that both can agree on. President Bush has proposed an expansion of the program by $5 billion over the next five years, but the Congressional request (as shown in the current bill) is more than ten times that amount.
Delay in Imperial’s acquisition of Altadis:
The European Union has delayed until at least October 18 the completion of its anti-trust review of the purchase of Altadis, S.A. by Britain’s Imperial Tobacco Group.
Financial market reports indicated that the E.U. has some concern over “commitments” made by Imperial, which could mean that Imperial may be forced to divest certain parts of Altadis which could lead to monopoly conditions in some member countries.
Already signaled is a plan to spin off the distribution and logistics arm of Altadis to CVC Capital Partners, leaving Imperial with Altadis’s cigarette and cigar businesses. Altadis makes Fortuna, Gauloises Blondes and Gitanes cigarettes, among others, and had the world’s largest cigar portfolio, including Altadis U.S.A., a stable of European brands and a 50 percent interest in Habanos, S.A., the distribution company for all exported Cuban cigars.
Japan Tobacco closes another Gallaher factory:
As Japan Tobacco continues to digest its purchase of Britain’s Gallaher Group, it will close a second Gallaher factory after announcing the close of the facility in Cardiff, Wales that makes Hamlet cigars.
A cigarette factory in Linz, Austria that makes Benson & Hedges and Memphis cigarettes will close at the end of 2009. The plant closure will affect about 300 jobs; the factory has been producing about 20 billion cigarettes a year. Production will be moved to an expanded facility in Hainburg.
Japan Tobacco will have 31 factories worldwide after the closure of the Linz and Cardiff facilities in 2009.
From the Cubador:
The latest dust-up between the Cuban and U.S. governments is over the issuance of visas. Cuba says the U.S. is in violation of an agreement to issue 20,000 emigration visas and the American Interest Section in Havana says that only 15,000 will be issued this year.
However, the Interests Section says that it’s the Cuban government which is the problem, because of restrictions which have not allowed the U.S. agency to hire 11 people – almost always Cuban citizens – to help with the processing of the many thousands of requests. The Cuban government responded, of course, that the Interests Section has enough people to process the visas and that the personnel requested were involved in non-visa work.
Consul General Sean Murphy told the Associated Press that 7,693 Cubans tried to enter the U.S. by boat from Cuba during the past 12 months, with about 70 percent aboard smuggler’s boats. This is only a tiny increase over the 7,088 who tried to cross over to the U.S. during the previous year, but Murphy noted that the now-favored route for Cubans to get to the U.S. is via Mexico along with hundreds of thousands of others from Latin America and the Caribbean.
~ Rich Perelman
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