President Clinton will demand that tobacco companies boost the $368.5-billion tobacco settlement reached in June by at least $50 billion to offset a special industry tax break, a White House official said Monday.
"We're going to insist that the industry pay at least an additional $50 billion to offset the write-off in the budget agreement," White House domestic policy advisor Bruce Reed said. "We also plan to insist on . . . more expensive penalties if they fail to meet the targets for reducing youth smoking."
Reed, speaking in an interview, was referring to a tax write-off inserted in the tax portion of the balanced-budget agreement designed to offset the cost to tobacco firms of a 15-cent-a-pack tax increase to fund children's health care.
White House spokesman Barry Toiv said the tax credit was slipped into the balanced-budget pact, which was approved two weeks ago, at the behest of top Republicans and over the objections of the Clinton administration.
In a separate development Monday, attorneys for the state of Florida said they will seek $12.3 billion in damages from the tobacco industry to recover Medicaid money spent on sick smokers. The lawsuit, which began this month in a West Palm Beach court, is the first case brought by a state to go to trial.
Under the landmark settlement reached in June, which is subject to congressional approval, tobacco companies agreed to pay billions to settle the smoking-related lawsuits brought by individuals and states. They also agreed to curb their advertising and marketing and to pay cash penalties if they failed to meet targets for reducing youth smoking.
In exchange, they would be protected from certain categories of lawsuits.
Under the settlement, smoking by those 18 or under must fall by 30% in five years, 50% in seven years and 60% within 10 years. If those targets are not met, the companies would collectively be required to pay an $80-million fine for each percentage point they fall short. This penalty would be capped at $2 billion a year.
Reed said the White House had not yet decided how to toughen these penalties.
He said the administration also wanted to ensure that the interests of tobacco farmers, who were not parties to the settlement, are protected.
Reed said tobacco farmers, whom the White House has consulted as it reviewed the settlement, would like companies to buy more of their tobacco leaf domestically.
Clinton's advisors are studying the settlement and expect to give the president a recommendation shortly after he returns from vacation on Sept. 7.