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1 smoking cigarettes of varying levels of tar and nicotine and

2 (2) the health risks associated with smoking cigarettes con

3- taining any substances commonly added to commercially

4 manufactured cigarettes.

5

(b) Within two years of the date of enactment of this

6 part, the Secretary shall report to the Congress the results

7

of the study or studies conducted pursuant to subsection (a)

8 and any recommendations for legislative or administrative 9 action.

Senator FORD. Our first witness this morning is the Honorable Julian Carroll, Governor of the Commonwealth of Kentucky.

STATEMENT OF HON. JULIAN M. CARROLL, GOVERNOR, COMMONWEALTH OF KENTUCKY

Governor CARROLL. Thank you very much, Senator Ford. I appreciate the opportunity to come and visit with this subcommittee for a few minutes this morning.

For the record. I am Julian Carroll, Governor of the Commonwealth of Kentucky. I appreciate the opportunity to appear today on behalf of those hundreds of thousands of Kentuckians who earn part or all of their livelihood from tobacco farming or who owe their jobs to tobacco-related industries.

As a practical matter, it strikes me immediately that the sliding tax as proposed in S. 3118 would be vary awkward for retail stores and perhaps all but impossible for vending machines-to deal with. It appears that the tax would be 5 cents on every pack of one brand of cigarettes and all the way up to 50 cents a pack on others. That would be a nightmare to administer but, of course, that is not a major concern of the Kentucky State government.

I also foresee some problem for many restaurants and other public places in Kentucky-as in all the rest of the country-in trying to separate smokers from nonsmokers while still getting the maximum use possible of their facilities. Again, that is not a problem of government, and it would be practically impossible to estimate the cost of that requirement to our businesses. A cost which, of course, would be paid by the consumers.

The labeling requirements of this bill also seem to be somewhat extreme. In all honesty, I wonder if this kind of labeling really has any effect. It seems to me that you might just as well require all automobiles to carry signs saying: "Caution. Driving can be fatal." I am somewhat gratified that this bill does finally order a study of health risks associated with smoking. I do note, however, that nothing is said in this bill to direct at least a part of that study toward discovering a way to remove from cigarettes whatever dangerous substances those studies might suggest are present.

That, to me, seems to be the direction in which most of the research should be concentrated. And I might also add that the research function mentioned in the bill would appear to be much more serious if money were specifically appropriated for it, as there is for research on behavioral aspects of young smokers.

Kentucky has for years been a leader in this kind of positive research on tobacco. That research has been financed by a State cigarette tax of one-half cents a pack. With those funds, the University of Kentucky has built up an impressive laboratory capability and staff specifically for performing research on tobacco. The Federal Government could perform a real service for millions of smokers in this country if they could give us some help to expand these efforts that we are now financing all by ourselves.

I won't sit here and try to tell you that this bill would kill the tobacco industry in Kentucky. But I will tell you that any taxing bill of this nature will be somewhat of an economic burden on certain seg

ments of the tobacco industry. And when that occurs, some of our citizens will be adversely affected financially.

I cannot estimate for you just what the economic impact of this bill would be specifically on our tobacco farmers. But I can tell you what tobacco means to the economy of this State. If a bill like this is enacted into law, many of the people in this State who depend on tobacco for their livelihood will lose some of their income. And if this bill is followed by heavier taxing measures later, that injury will

increase.

Some aspects of the tobacco industry is found in 118 of Kentucky's 120 counties. Altogether, nearly 300,000 people are directly involved in the production, manufacturing, and sale of tobacco and tobacco products. To give you some idea of what tobacco means to Kentucky, let me use just one county, as an example, Pulaski County, in southcentral Kentucky.

Pulaski County has over 4,000 tobacco allotments-the most in the Commonwealth. This means that over 4,000 families in Pulaski County depend directly upon tobacco for all or part of their livelihood. In Pulaski County, the average farm family has more than four members, meaning that close to half of Pulaski County's 45,000 people are directly dependent upon tobacco production. The presence of an auction market creates additional jobs in the industry.

Efforts have been made in recent years to diversify Pulaski County's agriculture; to bring in the production of such things as processed vegetables, eggs, broilers, beef cattle, and grain. But only the farmers with large acreage have been able to diversify their operation. The vast number of farm families rely on very small acreage; too small for the production of any cash crop other than tobacco.

Many tobacco growers in Pulaski County already must rely on offfarm jobs for at least a part of their income. And, while the Somerset area has strong manufacturing, medical, and tourism industries, these cannot make up for income these families would lose if they did not grow tobacco.

I might also point out that tobacco and its associated businesses pour huge sums of tax dollars into the treasuries of State and local government in Kentucky. Some of those are: $22.3 million from the cigarette tax, $7.8 million in corporation income taxes, $15 million from sales tax on cigarettes, and $5 million in withholding on tobacco industry employees. That amounts to over $50 million that we can actually count.

Kentucky now has the fourth strongest economy of any State in the Nation. And agriculture is the second strongest segment of our total economy, being nearly a $2 billion industry. Tobacco accounts for 55 percent of our total cash receipts from farm marketings.

We are proud of the stability which exists in our Commonwealth and we have worked hard over a long period of time to strengthen the State's economy. Kentuckians can ill afford to have their economy disrupted by legislation which punitively attacks a single industry. I do not want this to happen and I know you certainly don't want it to happen and I know many other Members of the Senate and the Congress do not want it to happen, and we appreciate the opportunity to come and express ourselves on behalf of the Commonwealth in that regard today. Thank you, sir.

Senator FORD. Thank you very much. Governor.

The next witness this morning is the senior Senator from Kentucky, my colleague and good friend. Senator Huddleston. The Senator is a member of the Agriculture Committee. We will be delighted to hear from you at this time.

STATEMENT OF HON. WALTER D. FUDDLESTON, U.S. SENATOR FROM KENTUCKY

Senator HUDDLESTON. Thank you very much. Mr. Chairman. First of all, I want to commend you, Senator Ford, and the Subcommittee on Consumers of the Senate Committee on Commerce, Science, and Transportation for conducting these hearings. It's extremely important that we provide as much basic and factual information as we can to our colleagues as they consider legislation and proposals being made that will have a tremendous economic impact not only on our State of Kentucky but many other States. And indeed upon the entire United States as it respects the tobacco industry.

We know this Nation is a major exporter of tobacco. Tobacco plays a very important role in the balance of payments.

Economic factors are deserving of consideration. Of course, health factors are, too, and I know that you and I and other Members of the Congress give full consideration to that aspect of the problem also.

Mr. Chairman, S. 3118, the measure before this subcommittee today. attempts to stop 55 million of our citizens from smoking by making them feel like outlaws and by imposing a confiscatory tax on cigarettes.

One-fourth of the population of the United States smokes cigarettes. And what the sponsors of this bill want to do is have the Federal Government prevent people from smoking by behavior modification techniques.

It seems to me that this is the big brother philosophy of government, making people conform whether they like it or not. The Senators who have offered S. 3118 have selected one product and one product alone to try to say, "We will make you conform to our standards of how we think you ought to live," to the exclusion of all others.

To carry the logic of this thinking, one should say, "We are going to use the Government to make you not do anything that is injurious to your health.”

Probably the most injurious factor to American health is that so many of us are too fat. So maybe we should enact a fat tax. On the first of every month, each person could weigh and if he or she were overweight, the Government could levy a tax on the poundage that was above normal.

S. 3118 has the potential to substantially change the smoking habits of the American public and totally decimate the tobacco industry. And I don't just mean cigarette manufacturers. Manufacturers, producers, warehousemen, dealers, distributors, and retailers would be out of busi

ness.

Do we want to tax out of existence products which we would not directly prohibit? The purpose of S. 3118 is to decrease smoking. This legislation says to the public that while Congress is not willing to take direct steps to ban certain products, we are willing to keep them out of the hands of those people who cannot afford them. This measure pro

poses a new regressive tax that would discriminate against those in the lower income brackets.

What do we want to call this legislation? If we want it to produce revenue, then we want it to fail in its so-called health protection functions. On the other hand, if the sponsors want it to succeed as a public health measure, then its revenue producing potential would be considerably less.

Kentucky is a major tobacco-producing State-the income from which all aspects well exceeds $1 billion a year,

I frequently receive antitobacco mail from individuals who are residents of this great Commonwealth. And these people tell me that I should not defend tobacco because it really isn't important to the economy of Kentucky.

As chairman of the Senate Subcommittee on Agricultural Production, Marketing, and Stabilization of Prices, I feel that I am in a unique position to judge the value of tobacco not only to the Kentucky economy, but to the national economy.

Now the avowed purpose of S. 3118 is to prevent the citizens of this Nation from smoking and thus totally destroy the tobacco industry. Last year one of the antismoking organizations developed what it called its "target-five" project. This program similarly had the objective of destroying the tobacco economy. I want to relate an estimate of the impact on the Kentucky economy if the "target five" program, which included terminating the tobacco price support program, were successful. Kentucky tobacco farmers would immediately lose $680 million in annual income. Now the chairman, I think, has pointed out very well that the impact of the loss of cash tobacco sales would far exceed just that amount and would have greater implications for the total farming community in this State because there are many small farms operating today that would not be able to operate if they were to lose their annual cash crop of tobacco..

That would mean not only the loss of tobacco production and its economic impact, but it would mean the loss of other products that are produced by these smaller farms-dairying perhaps, the corn they would grow, grain, or whatever else they produce and that would have a very significant impact upon the supply of feed-grains, meat, and other agricultural products in this country.

It would also have a great impact on the commercial enterprises that sell inputs to these farmers. It would be diverted to other uses very rapidly. Probably a good amount of land in Kentucky would be taken out of production.

Kentucky companies selling to tobacco farmers fertilizers, chemicals, gasoline, machinery, and other farm inputs would lose about $32 million a year. Kentucky merchants selling consumer goods would lose over $100 million annually. Kentucky tobacco manufacturers, wholesalers and retailers, would lose over $62 million in sales, and the Kentucky share of the Federal cigarette tax would drop by $19 million and the State treasury would lose $7 million. This tax money would have to be recouped from other sources, of course. And a reduction in land prices of tobacco farms would total more than a billion dollars.

Mr. Chairman, tobacco is a major agricultural commodity in the United States. It's grown on over 400,000 farms. There's currently