North Carolina is opposing President Trump’s support for the “One Big Beautiful Bill,” citing a hidden tobacco tax that threatens to disrupt the state’s agricultural economy. This change breaks with over 200 years of trade policy and could cost North Carolina’s tobacco industry an estimated $100 million per year. President Trump has indicated an openness to Senate amendments that could change the controversial tobacco provision.
Hidden Tobacco Tax Tucked Into Larger Bill
The recently House-approved “One Big Beautiful Bill” contains a provision that has alarmed North Carolina’s agricultural sector and business community. Section 112032 of HR 1 would eliminate tobacco products from the federal duty drawback program, a refund system that has been part of American trade policy for over two centuries. This change effectively creates a new tax on tobacco exports at a time when American farmers already face significant international competition.
The duty drawback program provides refunds to manufacturers when they export or destroy products that were initially taxed upon entering the United States. This system prevents double taxation and helps American exporters remain competitive in global markets. By removing tobacco from this program, the bill would impose significant financial burdens on an industry that remains vital to North Carolina’s economy.
ONE BIG BEAUTIFUL BILL RECONCILIATION PROCESS:
Trump encourages the Senate to make the "changes they want" to the Big Beautiful Bill as several members have floated additional SPENDING cuts – and then send it back to the House.
"In some cases, those changes may be something… pic.twitter.com/v6djhyP1LC
— TRUTH NOW ⭐️⭐️⭐️🗽 🎺 (@sxdoc) May 26, 2025
North Carolina’s Economy At Risk
The tobacco industry contributes over $30 billion annually to North Carolina’s GDP and supports approximately 200,000 jobs across the state. With more than 800 tobacco farms still operating in North Carolina, the potential impact of this tax change extends beyond just the farms themselves to transportation, manufacturing, and retail sectors. Industry experts warn that farm revenues could face multimillion-dollar reductions if the provision becomes law.
The North Carolina Chamber and the Tobacco Growers Association have voiced strong opposition to the proposed change. According to industry estimates, removing tobacco from the drawback program could cost the industry approximately $100 million per year. These costs would disproportionately affect smaller manufacturers and growers, potentially leading to industry consolidation and reduced competition.
Trump Tells Senate GOP to ‘Make the Changes They Want’ to Big Beautiful Billhttps://t.co/VMwIlkwf7C
— Binley (@BrendaIreland77) May 26, 2025
Trump Open To Senate Modifications
While President Trump has expressed support for the overall reconciliation bill, which aims to extend tax cuts, secure the border, and enhance energy development, he has also indicated a willingness to consider changes as the legislation moves to the Senate. This openness provides hope for North Carolina’s tobacco industry that the drawback provision might be modified.
Senate Majority Leader John Thune has confirmed that Senate Republicans intend to make changes to the legislation. “I’m a regular order guy. I think you can improve the product,” Thune stated, suggesting that the Senate will likely put its own stamp on the bill before sending it back to the House. This legislative process could provide an opportunity to address the concerns raised by North Carolina’s agricultural and business sectors.
Industry Response and Economic Impact
Tobacco Associates, Inc., representing North Carolina growers, has taken a strong stance against the provision. The organization emphasizes that the drawback program is crucial for U.S. tobacco farmers to compete globally, contributing over $1 billion and 7,470 jobs to North Carolina’s economy alone. Without this program, American tobacco exports would face significant disadvantages in international markets.
Advocates for maintaining the drawback program stress that it does not encourage domestic tobacco consumption, as it applies only to products that are exported or destroyed. The program simply ensures that American products can compete fairly in global markets without being burdened by taxes that international competitors don’t face. As the bill moves to the Senate, North Carolina’s agricultural community will be watching closely to see if their concerns are addressed.