Trump's tax bill has become a battlefield for tobacco giants
Industries from finance to health care to clean energy are pouring millions of dollars into Washington to influence the One Big Beautiful Bill Act, the legislative centerpiece of President Donald Trump's second-term agenda. Programs or tax laws worth hundreds of billions of dollars to various companies are at stake.
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The lobbying effort over the tobacco tax could be one of the most expensive ones this year.
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The 'duty drawback' tax policy at issue makes it easier for U.S. firms to export their leaf. Some companies buy tobacco from farmers, ship it overseas to be assembled into cigarettes, cigars and other products, then import the finished product.
Because final assembly of the product did not take place domestically, the companies receive a rebate on federal taxes and certain import duties. Companies that manufacture tobacco products in the United States, such as Altria, which largely does not sell finished products outside the country, do not receive the same tax rebates.
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'This has ended up being quite an arm-wrestling competition between one of our domestic companies and everybody else,' said Ray Starling, general counsel for the North Carolina Chamber of Commerce.
Altria, the parent company of Philip Morris USA and the firm pushing to end the tobacco tax treatment, has spent nearly $5 million lobbying Congress on this legislation and other issues through the first two quarters of 2025, according to federal disclosures.
The two firms that benefit the most from the tax break - British American Tobacco, which owns RJ Reynolds, and Japan Tobacco International - have each spent $170,000 on lobbying in the same period.
During Trump's first term, his administration attempted through executive action to eliminate the drawback program tobacco companies and some other exporters use, but that policy was blocked in court.
At Tillis's urging, the Senate Finance Committee eliminated the drawback provision from its version of the tax bill, which would preserve the tax rebate.
Now each chamber of Congress is competing over the legislation's final form. Budget hawks in each chamber are wary of the price tag of the legislation - it could add $3.3 trillion to the national debt over 10 years when factoring in its effect on the wider economy, the Congressional Budget Office reported Tuesday.
That makes any provision that could reduce the legislation's cost increasingly attractive. New polling from The Washington Post and Ipsos found Americans broadly oppose the measure, and especially dislike proposals to cut anti-poverty and anti-hunger programs to offset the bill's tax cuts.
Tillis told The Post that 'we have to' find a new policy to replace the $12 billion in revenue that ending the rebates bring in. But eliminating the subsidy would harm farmers in his state, he said, which is why he wants to keep the rebates in place. The tobacco industry contributes $31 billion annually to North Carolina's economy, according to the John Locke Foundation, a conservative think tank.
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'They have a disagreement on this policy, but they're partners. It's classic 'coopetition,'' said Tillis, using a term that describes when two competing companies rely on a shared infrastructure. For tobacco firms, many contract with the same growers for various types of leaf. 'At the end of the day, it's the impact on growers I have the concern with.'
An Altria spokesperson said in a statement that the drawback amounts to 'the U.S. government providing a direct cash subsidy to tobacco companies,' and said firms could more aggressively take advantage of the rebate if Congress does not close the 'loophole.'
An RJ Reynolds spokesperson said the provision 'poses a serious threat to North Carolina's economy, with potentially devastating consequences for farmers.'
That's because tobacco growers rely on the plant to help financially support a host of other crops, said Kimberly Foley, executive director of Tobacco Associates, a grower-run trade group.
Tobacco is aggressive to grow and can be disease-prone if not rotated with other crops, so growers frequently group tobacco with sweet potatoes, corn, fruits and vegetables, said Starling, who grew up on a tobacco farm. Without the tax rebate, which helps tobacco companies afford to buy the crop at higher prices, that multi-crop farming framework can make it so farms struggle to turn a profit.
'Tobacco is what's carrying everything else,' Foley said. 'Losing volume for tobacco either takes away their primary income opportunity on the farm and their most reliable income opportunity on the farm … or we lose the functionality and the logistical capabilities of the farm.'
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The issue could resonate in North Carolina's closely watched 2026 Senate race, which could help determine control of the upper chamber after the midterm elections. Democrats are recruiting former governor Roy Cooper to jump in the race to try to unseat Tillis. Democratic Rep. Wiley Nickel has already declared his candidacy.
PACs and individuals associated with Altria and British American Tobacco are significant Tillis donors, according to OpenSecrets, which tracks corporate spending and political influence. Altria's political finance arm and people associated with the company gave more than $77,000 to Tillis and his PACs between 2019 and 2024; BAT contributed more than $44,000.
But beyond the manufacturers, tobacco growers - and the regional cachet the plant holds - are a potent force and sympathetic symbol in Tar Heel State politics.
'Tobacco is still very culturally relevant in North Carolina,' said Starling, who was a senior adviser to Tillis in the state House of Representatives and later his Senate chief of staff. 'There's a big contingency of tobacco alumni, people who grew up around it, and it helped them buy their first pair of tennis shoes. I think there's a lot of respect for the industry and the hard work and work ethic that people engaged in the industry have shown.'
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