Mr. CURTIS. On the 9,500 organized it's $115 million a year.

Senator FORD. $115 million for 9,500 families?

Mr. CURTIS. Right.

Senator FORD. That's a pretty significant piece of change for a State, isn't it?

Mr. CURTIS. Yes.

Senator FORD. And if we put these people out of work, in effect, it wouldn't be just rippling; it would be waves?

Mr. CURTIS. In Louisville we had American Tobacco Co. who had a plant there and due to people like Califano and others before Califano came along, due to their restrictions on tobacco and the taxes, particularly in the State of New York and the city of New York and elsewhere, where sales dropped down, it caused this company to close down one of its operations and put 2,000 people on the street and we have attempted in our organization to keep some record of these people.

To start with, somewhere in the neighborhood of 75 percent of them went to unemployment. And with our help, using our influence in other operations, we were able to place 25 percent of them. But even today-some of these people were at the age-they went to work there when they were 18 or 19 years old and we were talking about 20, 30, and 35 in some cases, years of service with the company that were placed on the street. You know, when you get to 50-

Senator FORD. I understand that.

Mr. CURTIS. You have a problem finding jobs.

Senator FORD. That's right.

Mr. CURTIS. And no one wants to hire someone who's 50 because of all the benefits involved. A lot of these people even today-and this happened in 1964-some of these people still haven't been able to find a permanent job, particularly to give them the income and keep their standard of living on what it was when they had this permanent job. Another good example is in Owensboro when American Cigars closed its operation-320 people were out of a job and this was because of the restriction on tobacco.

Senator FORD. I guess we could get into some other areas, but we need to keep on moving. You have been a very good witness. I get kind of worked up when people begin to understand what we are trying to do. So I do thank you, Bobby, and if you have any additional information you want to submit to us we would be glad to use it and we are very pleased that you could be here with us today. Mr. CURTIS. Thank you, Senator.

[The attachments referred to follow:]

AN ASSESSMENT OF THE IMPACT OF THE TOBACCO INDUSTRY ON THE ECONOMY OF THE 50 UNITED STATES AND THE DISTRICT OF COLUMBIA 1

1

(By Kenneth A. Reinhardt, William D. Lewis, State of North Carolina, Department of Administration, Division of Policy Development)

The tobacco industry in the United States uses resources and produces income at all levels, from production on the farm to final consumer sale in the marketplace. Tobacco produces income not only for those who directly participate in its production, manufacturing, and distribution, but also for owners of resources used in the evolution toward the final product purchased by the consumer. The industry has been a dynamic force in the growth of the economy of the 50 states, 1 Presented to the August 1978 meeting of the National Governors Conference.

especially those which contain farms producing leaf, since its planting by the Virginia settlers led by John Rolfe, in 1609.

In 1977, approximately 276,000 farms in 23 states cultivated a tobacco crop which yielded cash receipts of $2.3 billion, nearly 2.5 percent of all U.S. farm cash receipts. North Carolina led all states in cash receipts with $866 million, followed by Kentucky with $572 million and Tennessee with $174 million. Farms producing tobacco generally accounted for 10 per cent of all farms in tobacco producing states, although they accounted for 83 percent, 50 percent, and 43 percent in Kentucky, Tennessee and North Carolina, respectively.

Almost 966,000 acres of tobacco were harvested in 1977, including 392,500 acres in North Carolina and 199,800 acres in Kentucky, and the harvest yielded nearly two billion pounds. Production required the services of more than 300,000 farm laborers, including many women and children, handicapped, older persons, and unskilled persons with few alternative employment opportunities, who worked an estimated 247 million hours for $621 million. Producers cost was $1.6 billion, including the farm labor payments of $621 million. (See Table No. 1)

In 1977, there were 864 auction warehouses divided among 175 markets in 12 states, led by North Carolina, with 260 warehouses in 48 markets, and followed by Kentucky with 245 in 40 markets. The labor force in these warehouses received an estimated $20 million in wages.

Local governments received $16.5 million in real estate taxes, led by North Carolina with $7 million, followed by Kentucky with $3.5 million and Georgia with $1.5 million. Returns to investment amounted to $685.4 million, including $254.2 million and $197.9 million in North Carolina and Kentucky, respectively. At the processing and manufacturing level in 1976, 24 states had 393 plants manufacturing cigarettes, cigars, smoking and chewing tobacco and snuff, storing, stemming and redrying of tobacco, and preparation of tobacco after auction sale for the processing plant. North Carolina topped the list with 144 plants and facilities, followed by Florida with 56 and Pennsylvania with 45. The twelve cigarette manufacturing plants in the country were located in four statesNorth Carolina (5), Kentucky (3), Virginia (3), and Georgia (1). There were 91 stemming and redrying plants in 12 states, 138 cigar plants in 17 states, and 44 smoking and chewing tobacco and snuff plants in 12 states.

Total employment in the processing and manufacture of tobacco products was estimated at 64,800 workers, with annual wages amounting to $704 million. This includes 54,800 production workers who were paid $543.5 million. Of the total employment, 40,800 were in cigarette plants ($521.4 million), 8,400 in cigar plants ($55.7 million), 3,100 in chewing and smoking tobacco and snuff plants ($29.4 million), and 12,500 in stemming and redrying plants ($97.6 million).

U.S. tobacco product manufacturers received a gross income of $4.2 billion in 1976, excluding taxes, $3.7 billion by cigarette manufacturers and $565 million by all others. They paid $2.5 billion in federal excise taxes. (See Table II)

In 1976, 1,863 primary tobacco wholesalers sold tobacco products worth over $10.6 billion. These primary wholesalers employed an estimated 37,000 people at wages amounting to about $346 million. New York employed 3.516 people making wages of $42,716,000 and California employed 2,162 at wages of $28,729,000.

Each state collected an excise tax on each pack sold to wholesalers, averaging from 2 cents in North Carolina to 21 cents in Connecticut, Massachusetts, and Florida. Aggregate collections in 1976 amounted to close to $3.6 billion, with New York leading all states with $337.4 million, followed by Texas with $279.2 million, California with $266.5 million and Pennsylvania with $245.1 million. Tobacco tax collections represented almost 15% of New Hampshire's total state tax collections, over 7% in New Jersey and over 6% in Arkansas, Florida, Rhode Island, and Texas.

A total of 348 cities and 17 counties in 7 states charged the wholesale establishments a grand total of almost $114 million in gross tobacco taxes in fiscal year 1976; cities charged $95.8 million, while counties collected about $18 million. New York City's taxes of over $51 million made it the leader among states in these taxes, while Missouri city and county taxes (almost $20 million) was second.

Over 1.400,000 retail outlets in the United States sold tobacco products for an aggregate price above $16.3 billion in 1976. New York led the states with 133,835 outlets doing $1.4 billion in tobacco product sales, followed by California with 114,901 ($1.2 billion) and Illinois with 73.888 ($1.1 billion). Employment from the sale of tobacco products ranging from genuine cigar stores to service stations

to general variety stores, is estimated in the millions while payroll is billions of dollars. For those states which administer a sales tax, the gross figure attributable to the sale of tobacco products for all states is $266 million, including California with $71.5 million, Indiana with $18.3 million, and Florida with $16.8 million.

In international trade, despite a dock strike that distorted shipments in the 4th quarter, the United States exported $1.1 billion worh of unmanufactured tobacco in 1977. This was an increase of 9% over the previous year. Also exported, was $637 million worth of manufactured tobacco products, mostly cigarettes, an increase of 19%. The total was over $1.7 billion. Duty paid imports of leaf and mnaufacturers increased 18% over 1976 to $373 million. Tobacco contributed $1.36 billion net in 1977 to the U.S. balance of trade, a record breaking amount.

The cultivation, curing, and preparation for market of tobacco requires a variety of inputs from all over the United States. This includes fertilizer, which is laid in the soil before transplanting seedlings to burlap bags which are used to bundle sheets of tobacco sold on the warehouse floor. Nearly every state in the union has some stake in the economic value of these necessary inputs.

A considerable portion of the farm machinery used is manufactured in Midwest states like Michigan. Indiana, Illinois and Iowa. Pesticides and fertilizes are produced in Texas, Utah, Tennessee, New Jersey, Arkansas, Delaware, New Mexico and Florida. Plant bed covers are largely made in Missoni and New Jersey, irrigation equipment in states west of the Mississippi, and burlap in Minnesota. The production of these and all other inputs provides a great share of employment and income for the citizens of the states concerned.

In summation, then, the tobacco industry is the sustaining factor in the lives of millions of Americans. The employment and income generated by the industry at every stage makes it clear that tobacco is of tremendous significance in the U.S. economy.

10. Gross sales tax attributable to tobacco (millions) --

$13.85

Auction warehouses:

20. Number of sales floors-

21 Number of markets___

Processing and manufacturing level (1976):

22. Number of establishments..

23. Employment

24. Payroll

25. Cost of materials (millions).

26. Value added (millions).

27. Value of shipments (millions).

1 Includes cigarette manufacturing plants only.

NOTE-Partial listing of products used in production of tobacco: Product, Tractors; company, International Harvest Co.; city, Louisville.

245

40

20

19.000

$115,000.000

$300.2

1 $699.6

1

$1, 202.9

THE ECONOMIC IMPORTANCE OF THE U.S. TOBACCO INDUSTRY

(By Robert H. Miller, Agricultural Economist, Commodity Economics Division, Economics, Statistics, and Cooperatives Service, U.S. Department of Agriculture)

THE MAIN SECTORS, BY STATES

Farm Production.-In 1977, about 276,000 farms produced tobacco having a cash value of $2.3 billion. Although twenty-three states have farms growing tobacco, most of them are in the South. Six states accounted for 90 percent or more of the tobacco allotments, farms producing tobacco, cash receipts, and employment. Detailed information for all states is given in Table 1 and 2 which show farm production, hours of labor, labor and other direct costs (excluding rent), crop value, and allotment value.

The tabulation below shows the six leading states, ranked by the amount of cash receipts from tobacco. For the country as a whole, tobacco cash receipts were 2.5 percent of total cash farm receipts; for the six states the percentage is 22. The heavy concentration of this crop is evident from the figures-North Carolina and Kentucky account for 64 percent of the cash receipts from this crop.

In the 3 leading States, North Carolina, Kentucky and South Carolina, tobacco is the leading source of cash receipts from farm marketings and ranks high in Virginia, Georgia, and Tennessee. However, the relative importance of tobacco in total cash farm receipts has declined. For the 6 State area, cash farm receipts jumped 180 percent from 1955-59 (average) to 1977; tobacco receipts gained 118 percent. As a result, tobacco declined in importance from 28 percent of cash receipts in 1955-59 to 21 percent in 1976 (22 percent in 1977, when crops were seriously hurt by drought).

5 LEADING COMMODITIES RANKED ACCORDING TO CASH RECEIPTS, 6 LEADING TOBACCO STATES, 1976

Source: Compiled from "State Farm Income Statistics," Supp. to Stat. Bul. 576, Economic Research Service, U.S. Department of Agriculture, 1977.

TOBACCO'S SHARE OF CASH FARM RECEIPTS FROM MARKETINGS, 6 LEADING STATES, 1955-59, 1967, AND 1977

From 1955–59 to 1977, North Carolina, the largest tobacco-producing State, had a 173 percent increase in cash farm receipts, but a 91 percent increase in receipts from tobacco. Tobacco declined from 47 percent of total receipts in 195559 to 33 percent in 1977. Other States in the south-eastern producing area had gains in total cash farm receipts ranging from 126 percent in Virginia to 218 percent in Georgia. Cash receipts from tobacco relative to all commodities decreased for all States in the six State area.

Farm numbers further illustrates the importance of tobacco:

In addition to the dominant tobacco-growing states, the following six states have from 100 to 7,600 farms producing tobacco, accounting for virtually all of the remaining 10 percent of farm income from this crop.

Farms growing tobacco are relatively small, but a number of crops besides tobacco are grown. Tobacco accounts for 3.3 percent of the area planted for the 6 leading tobacco producing States. North Carolina, the ranking State has 8 percent of crop acreage in tobacco. The acreage planted in tobacco averages approximately 32 acres per farm, nationally. However, the range is considerable. In Tennessee, the average is slightly over one acre per farm. At the other extreme, Connecticut farms average 37 acres.

County Patterns.-Tobacco allotment and Census of Agriculture data show the number of counties with farm allotments or farms growing tobacco. Of 3,068 counties and parishes in the United States, 21 percent, or 651 counties report tobacco allotments or production.

Farm earnings are a major source of earnings in many counties where toabcco is grown. In addition, a major share of the farm earnings are derived from such primary crops as tobacco. For example, in Maryland, tobacco ranks seventh as a source of cash farm income (3.3 percent of the total), but virtually all the tobacco is grown in 5 counties of southern Maryland where it represents about 44 percent of cash receipts from farm marketings.

Farmers are changing from a reliance on single crop agriculture as the major source of income. However, major changes in agriculture policy pertaining to tobacco would have a substantial effect on the economies of many local communities. (D.H. Carley, Farm Earnings: Total Earning Relationships in Southwest Georgia, Research Bulletin 173, Dept. of Agricultural Economics, Georgia Station, 1975).

Tobacco Leaf Handling and Processing.—The processing sector of the tobacco industry (defined by Census as stemming and redrying) generally follows the geographical pattern set by tobacco growing. The principal states, ranked by total income are shown below.