Local News

R.J. Reynolds Trying To Keep Tax Incentives

Posted March 16, 2004 5:23 a.m. EST

— Tobacco giant R.J. Reynolds (RJR) is on the defensive. The tobacco company is trying to hang on to tax incentives despite hitting farmers with bad news.

When tobacco farmers learned that RJR would cut this year's contracts in half, they passed their frustration to lawmakers.

"They mentioned that they would double the volume and triple the exports," said Sen. John Kerr, D-Wayne. When asked if the company was living up to their agreement, Kerr responded, "I don't believe they are at this time."

In a written statement, RJR said even though contracts with growers will be reduced, RJR will ultimately purchase the same level of North Carolina leaf as last year because the tobacco giant agreed to buy more from excess tobacco inventories last December.

Still, some lawmakers say the blow to growers makes them second-guess a deal to give Reynolds $120 million in tax breaks. RJR Spokesperson Jan Smith told WRAL, "the incentive package is about bringing additional jobs to North Carolina. The amount of tobacco we buy is a completely separate issue."

At a legislative hearing, Rep. Paul Luebke, D-Durham, questioned incentives without wage standards, especially when they support a public health hazard.

"What they buy from North Carolina farmers is an apple issue. What they get in terms of a tax credit is an orange issue and probably the orange issue should not have been offered in the first place," he said.

Gov. Mike Easley's fiscal policy adviser Dan Gerlach said the governor is trying to keep high-paying jobs in the state.

"The governor is trying to find out the story and will encourage the company as it's always been a good corporate citizen, to purchase as much leaf as possible. The reductions were not expected at all," Gerlach said.

Easley said he understands RJR's business challenges. The governor said he will continue conversations with Reynolds to protect the interests of growers and the cigarette maker.