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Americans for Tax Reform and Big Tobacco

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

Americans for Tax Reform (ATR) had long been a major ally of major U.S. tobacco companies.

ATR and Big Tobacco

The president of Americans for Tax Reform is Grover Norquist, whose role as a major player on tax policy came at a time when the tobacco industry was floundering with its conventional lobbying. In an internal Philip Morris memo from May 1989, Roy Marden outlined the company's problem: "There is a consensus that we have lost the public opinion battle concerning excises. To attempt to regain the upper hand, we need to improve the argumentation with federal and state officials, create new ways to use current ideas, and devise new ideas, new research and new ways of communicating with policymakers." [1][1]

Ahead of the election of Bill Clinton as President of the US in late 1992, the R.J. Reynolds tobacco company developed an action plan to address what it described as the "health care excesses issue"; RJR was worried about the possibility that Clinton’s proposals for the introduction of a national health care might "possibly be financed in part by higher cigarette taxes." [2]

One tactic considered as part of the plan was to consider “possible third-party coalition work” to get ‘credible, non-tobacco voice for hearings and for generating information on issue to media, op-eds, letters etc”. Likely coalition partners included “insurance companies, Americans for Tax Reform and Citizens Against Government Waste.”

RJR canvassed the prospect of placing a story in “Beltway journals, other, typically conservative, thought leader publications”. The draft plan stated RJR supervisor “Tim Hyde to work with Grover Norquist for possible by-line piece.” [It is unclear whether the article ever proceeded].

On September 5 1993 - Labor Day – in 152 newspapers across the US, ATR published a major advertisement that asked "How much longer can this go on?" and featured a graphic of a torrent of water pouring into an overflowing, leaky bucket labelled "wasteful government spending." [3]

"Next week the President will introduce a plan requiring billions more in spending to reform the health care system. Along with that proposal will be another huge increase in taxes to pay for it. Some of the new taxes being discussed are on everything from employment benefits, insurance premiums and medical services, to consumer products such as alcohol and tobacco," the ad stated. The ad went on to urge readers to call their political representatives urging them to "cut spending before raising taxes."

An internal PM memo revealed the tobacco and alcohol company's close association with the advertisement. "The ad was developed and refined based on the opinions of focus groups conducted between May and August in eight cities," the memo said of the ad which was "targeting 51 congressmen in 27 states."

The strategy behind the ad, the memo stated, was to “lay groundwork for FET fight by highlighting the need to cut wasteful spending before further tax increases” and to “target marginal Members by getting their constituents to call and demand an end to new taxes without spending cuts. [4]

In August 1993, when Philip Morris had convened a meeting to discuss their forthcoming campaign against federal excise taxes. Roger Ailes and Scott Ehrlich from Ailes Communications were, according to the agenda, scheduled to attend. The agenda was due to review the results from focus groups organized in Houston and Seattle to test advertising concepts such as "Enough is Enoug" and “obtain agreement for Labor Day advertising ‘kick-off’”.

Also on the agenda of the meeting was the need to resolve a number of key aspects of the advertising campaign including the recommendation for “sponsor confirmation”. While no minutes appear amongst the tobacco industry documents, it appears PM chose Americans for Tax Reform to front the advertising campaign. [5]

In a March 1994 review of its lobbying options for defending its business, countering Clinton’s healthcare plan was a high priority. “The strategy is to, at each stage, build support for reducing the size and scope of the health care plan thereby reducing the need for funding at the levels suggested by the Administration,” the review stated. [6]

In a later section canvassing advertising options, PM explained “we have developed ads on FET developed by Ailes Communications. Only a couple were run and they were run under the name of a tax organization as focus groups showed this was most effective”.[7]

While the cost of the advertising was not disclosed, PM put a brave face on the fact that a minuscule number of the 5.5 million purportedly reached by the ad followed through. “Although people most likely to contact their Representatives already knew how to do so, the ad generated more than 2,000 calls to the number who wanted to contact their Representative but didn’t know hoe”, the memo stated.

In a memo so senior PM public affairs staff, David Nicoli cited the ads approvingly even though he got the organisation’s name wrong. “Now that the Presidents plan has been released, it will be very important for anti-tax groups nationwide to further amplify the theme that Citzens for Tax Reform established in their ads”, he wrote.[8]

“To aid our grassroots efforts, we need to have as many anti-tax groups as possible with whom we have relationships attack the Clinton plan generally for the massive tax increases it contains and, where appropriate, specifically for the large FET it proposes,” he continued. (Emphasis in original).

On 20 September, ATR followed up with another ad, “Let’s shut off new tax increases … to stop wasteful spending”. [9]

Following the ad, Scott Ehrlich from Ailes Communications sent a confidential memo to PM letting them know that “Norquist and ATR continue to appear on talk radio around the country”.

Ehrlich went on to flag possible options for responding after Clinton announced his plan including what he tagged the “underground attack” mobilising pressure on members of congress through their home towns. “This kind of effort would probably entail more money, however it would be designed to hit hard at the key representatives through their soft underbelly while attempting to stay under the radar of the national news media,” he wrote. [10]

In February 1994 Philip Morris public relations staffer David Nicoli and lobbyist Kathleen Linehan were pondering the possibilities of generating letters opposing an increase in the Federal Excise Tax [FET] on tobacco. Nicoli turned his mind to potential of the anti-tax groups. In an e-mail to Linehan, Nicoli confessed that he didn’t have a “good enough grasp on these groups to give you a final read yet”.

“But tentatively, I like the anti-tax groups (Tax Foundation, de Toqueville Institute, Citizens Against Government Waste, National Taxpayers Union, Americans for Tax Reform, etc) because we are in an election year, they can give a good spin on the FET, they can raise havoc w/the rest of the taxes in the Clinton plan too, we have good relationships w/them, and some of them are no holds barred types that can generate some real heat in the field”, he confided.

“I know these are seen as right wing groups, but our agendas match up well and “swing” Ds (Democrats-ed) have to pay some attention to this kind of noise in an election year that follows the biggest tax increase in history … this is the best direction I can see it going in for the time being to compliment [sic] CSE’s efforts on E&C and our own grassroots efforts,” Nicoli concluded.[11]

(It is unclear whether Nicoli is still with Philip Morris but, according to the Philip Morris website, as of April 2002 he was Vice President, Corporate Affairs, Strategy and Social Responsibility, Philip Morris Management Corporation.)

In a February 1994 roundup of Philip Morris lobbying activities, Craig Fuller outlined elements of the company’s efforts to defeat Clinton’s health care proposal. One element, he explained, involved “working with Americans for Tax Reform to develop details on the economic and criminal effects of the prohibitively high-cigarette excises in Canada, including late breaking coverage of the recent tax rollback”. [12]

Another internal Philip Morris review of groups it considered its allies in counter Clinton’s health care proposal candidly described ATR as “a staunch ally of PM for a number of years in many tax battles, ATR has sponsored print ads against the abuse of excise taxes to fund health care as well as VNR’s on the subject, most recently one detailing the impacts of prohibitive cigarette excises in Canada on the economy and crime … which had a profound influence on the eventual decision to rollback the tax”.

“ATR is very close to proponents of alternative health care plans, has good access in the dungeons of Washington as well as with its many state-level contacts throughout the country, and could be mobilized for lobbying or other grassroots tactics either in Washington or key legislative districts. This has proven to be particularly helpful in state excise battles, and, with ATR’s expertise in the town hall and direct mail formats, could be explored here as an adjunct to the CSE effort”, it continued.(CSE is Citizens for a Sound Economy). [13]

Other tobacco companies liked ATR’s efforts too. In October 1996 R.J. Reynolds sent ATR a cheque for US$100,000. “We are pleased to give our support”, RJR’s Vice-President of Federal Government Affairs, Tommy Payne, wrote in the accompanying covering letter.[14]

RJR’s role also extended to running media training sessions for its third party allies. “Hyde has already committed to doing one in DC, for national coalition folks he works with there (Americans for Tax Reform, Citizens for a Sound Economy, Small Business Survival Committee, etc)”, RJR’s Mike Phillips explained in an e-mail.Media training

In April 1997 ATR’s State Projects Director, Damon Ansell, was hustling RJR for a $3000 grant for an Alaskans for Tax Reform. “Alaskans for Tax Reform will use the money to take out two newspaper advertisements thanking state legislators for signing the Taxpayer Protection Pledge,” Ansell wrote. Dave Powers from RJR liked the idea and approved the request in full. [15]

When in early 1994 [CHECK DATE]the House Ways and Means Committee backed an increase in the Federal Excise Tax [FET] to $1.49 per pack to pay for Clinton’s proposed health care plan, Norquist sprang into action. “Together we can kill this outrageous tax hike that Bill Clinton, and his tax and spend allies in Congress plan to levy on you and millions of smokers to underwrite their flawed Health Care Reform Plan,” Norquist wrote in a letter calling on smokers to lobby committee members.

However, sensitive to popular support for improved health care, Norquist chose not to defend the status quo. “Now, the current system is not perfect. There are real problems that need to be fixed. But we cannot put the entire responsibility for paying for the Plan on the backs of smokers or those who depend on tobacco for their jobs,” he wrote.

“The Federal Government already gets enough money from the taxpayers and they squander it on wasteful, pork barrel programs. If Bill Clinton wants to create another national Government-run program for health care, he should start by cutting spending on existing programs, NOT RAISE TAXES AGAIN!,” Norquist continued. [16]

That year, the ATR organised a postcard writing campaign urging Congress to cut government “instead of trampling on taxpayers individual rights and levying new taxes”. Tobacco industry officials confirmed to the Washington Post that ATR was funded by R.J. Reynolds and Philip Morris.[17]

The tobacco companies – along with other business and conservative groups – ultimately succeeded in derailing Clinton’s healthcare plan. Ramhurst, a PR and lobbying company hired by RJR said of the defeat of the health care plan “I think that was one of our biggest accomplishments. Tobacco looked like it was going to take a big hit”, said Doug Goodyear, Ramshurst’s Vice-President. [18]

For ATR the proposed tax hike on tobacco created the opportunity to solicit tobacco companies for support. “Met with Grover Norquist of ATR. The organization is planning new state specific activities (i.e. candidate/incumbent anti-tax pledges, rallies, etc). They will be seeking our support”, an October 1994 Philip Morris ‘”issues management status report” recorded.[19]

When in 1995 the then New Jersey Republican Governor, Christine Todd Whitman, backed a tobacco excise increase, Goodyear was involved in the campaign that defeated the proposal. Goodyear attributed their success to working with groups such as Americans for Tax Reform. “We try to reach out to like-minded groups … Anti-tax groups are natural ones for us to reach out to,” Goodyear told Mother Jones.

Announcing a media conference to oppose Whitman’s plan, Norquist railed against members of the legislature “whose members are more interested in obeying special interests than in serving the general taxpayer”. [20]

After the initial defeat of Whitman's proposed increase in the tobacco tax, RJR fretted that it may be resurrected. “To keep some opposition to the tax in the forefront, Gallant recruited op-eds from NJSR President Bill Lear, Dana Joel of New Jersey Citizens for a Sound Economy and Grover Norquist of Americans for Tax Reform that voice opposition to the cigarette tax increase. All will be dispensed on a statewide basis.” [21]

In 1996 the US federal Occupational Safety and Health Authority was considering introducing bans on workplace smoking. In anticipation, Philip Morris planned to mobilise small business groups to defeat what it described as “over-regulation”. PM hoped to be able to identify aggrieved local businesses who would be willing to act as spokespeople supplemented by national groups – including Americans for Tax Reform – “that may be able to provide spokespeople on this issue". [22]

ATR and Philip Morris had close ties. Internal PM documents, posted to the web following the settlement of major legal cases against tobacco companies in the US, reveal that PM contributed $30,000 to the ATR Foundation in 1994. [23]

Indeed, the need to liase with ATR was formalised in the duty statement of Robert S. Reese, Jr., Director Federal Tax, Human Resources and Fiscal Policy issues for the Washington D.C. office of Philip Morris. [24]

Reese, who had spent fifteen years as a senior Washington representative for the American Trucking Association before joining Philip Morris in 1989, was also tasked to “identify (create when/where necessary and be pro-active in positioning Philip Morris with third party groups whose mission and goals co-incided with the company’s objectives in all subject matters that are my responsibility”. [25]

Internal Philip Morris documents also reveal that ATR also participated in a coalition founded in 1996 called Project Relief. “Unlike ARR [Alliance for Reasonable Regulation]”, wrote Leonard Miller and Teresa Gorman, from the Washington D.C. law firm Swidler & Berlin, “Project Relief supported efforts to amend/override environmental statutes which were perceived to be overly stringent and cost ineffective”. [26]

“Project Relief’s Steering Committee was open to any organisation willing to contribute $1,000 and the use of its name”, they wrote. The project, they wrote, was initially formed to “provide support for Congressman Delay’s regulatory moratorium.”

While the initial focus was to reduce existing regulatory requirements, Miller reported that the organisation “recently met with Congressman DeLay and agreed to refocus efforts away from reform proposals to advocating a more positive Republican message on the environment”.

In a July 1997 lobbying disclosure report filed with the Alaska Public Office Commission R.J. Reynolds disclosed that in April 1997 it had paid “Grover Nordquist” [sic] $3,445 for what is candidly described as “PR in support of lobbying activities”.[http:// legacy.library.ucsf.edu/tid/usn60d00]

RJR were also aware of ATR’s plans. “Grover Norquist of the Americans for Tax Reform will host a news conference Monday in New Hampshire to oppose a cigarette tax increase”, a 1997 internal RJR memo noted.[27]

The following month, Norquist was on the road speaking out against increasing taxes on cigarettes at the request of RJR. “Grover Norquist of the Americans for Tax reform will appear in Augusta, Maine, next week to oppose cigarette tax increases. His appearance was requested by RJR”, an internal May 1997 memo reported.[28]

In February 1998, Democrats in the U.S. Senate Democratic complained that Norquist had received improper funds from the Republican National Committee and violated ATR's tax-exempt status by engaging in political activities including a direct-mail and phone-bank campaign in 150 Congressional districts challenging Democratic criticism on the GOP's Medicare plan.

Norquist also sought to shore up support amongst wavering Republicans. “I am getting the uneasy feeling that the republicans are increasingly willing to stand aside and allow some sort of tobacco tax to pass during this session. … Clinton and Gore are developing the idea of “good taxes” on “bad things” or “bad people”. Cigarette taxes are first. Then beer. Then big cars. The ultimate target is to use the taxes to fund their own agenda, such as implementing the Kyoto treaty,” Norquist warned.[29]

However, signatories to the ATR Tax Pledge were not bound to oppose increases in excise tax – a point Norquist conceded. “While excise taxes have not been technically part of ATR’s Pledge program, they have always fallen within the spirit of this effort. As I’ve said many times, a tax is a tax,” Norquist wrote.

ATR's opposition to anti-tobacco lawsuits

In his January 1999 State of the Union address, President Bill Clinton annouced "that the Justice Department is preparing a litigation plan to take the tobacco companies to court and with the funds we recover to strengthen Medicare". In its 2000 budget Clinton sought $20 million to fund the Department of Justice’s tobacco task force.

In a media release Norquist complained about the prospect that the tobacco companies would be sued.“Clinton’s call for an increase on tobacco is particularly egregious because not only does he want a huge new tax increases, but he wants to sue tobacco companies for money that Congress will never give him,” he stated. However, Norquist did not disclose that the tobacco companies were major sponsors of ATR.[30]

In an internal strategy paper canvassing options to prevent any funding appropriation for any suit the Philip Morris’s Washington Relations Office (WRO) reported that it “has outreach activities underway with the following groups and is requesting funding support for them as well”. [Federal suit strategy outline update]

Along with ATR the memo also listed Citizens for a Sound Economy, Coalitions for America, National Taxpayers Union, Frontiers of Freedom, Small Business Survival Committee, Chamber of Commerce and the American Tort Reform Association.

In a early February 1999 letter to radio show hosts, Norquist railed against the proposed tax on cigarettes and lawsuit against the tobacco industry. While claiming the lack of a general tax increase as a victory, Norquist reported the “bad news is that many otherwise solid conservatives melt when the tax is on a ‘bad thing’ or ‘bad person’, especially when the purported reason for the tax is to ‘help children’,” he wrote.

Three weeks later, Norquist penned a letter, with accompanying invoice, to PM’s Manager of Public Affairs, Kirk Blalock requesting $200,000 in funding for ATR and its associated entity the Americans for tax Reform Foundation. “Thanks to support from such groups as Philip Morris, ATR and ATRF are able to work with think tanks and policy groups in all fifty states, as well as maintaining our presence on Capitol Hill,” Norquist wrote. [31]

In 1998 the ATR and ATRF had received $150,000 from PM but a year later head office was insisting on cutting expenses. While the WRO recommended $210,000 for the ATR and ATRF combined, the budget proposed only $75,000 that year for the two entities. [32]

In April, Norquist was busy dispatching letters to members of Congress warning of the dire consequences of allowing the Justice Department to sue tobacco companies. “It is clear that the Clinton administration is attempting or (sic) extort money from a legal industry to fund new social programs … It is truly frightening when the federal government wields its unlimited power to force an industry to pay for the choices of adults,” he wrote to Representative Robert B. Aderholt and copied to members of the Appropriations Committee.[33]

Despite PM's cost cutting, Norquist, had ambitious plans for attracting funding from a coalition of tobacco companies. In April 1999 he sent a three-page proposal to both Philip Morris and Lorillard titled “No taxation through litigation – stopping the federal Medicare suit”.

“We propose an aggressive campaign on both the federal and state level focused on shutting down the federal Medicare litigation efforts,” the proposal – which was seeking US$582,672 - stated. [While the proposal referred solely to Philip Morris an identical copy also appears in the files of Lorillard without company names being changed].

While the federal legal case was aimed at recovering medical costs incurred by taxpayers as a result of the consumption of tobacco industry products, Norquist sought to redefine the suit as a tax increase. “This lawsuit is President Clinton’s backdoor attack on a Congress which has rejected his assault on the tobacco industry. This is simply taxation through litigation and therefore, a very real tax increase,” his proposal argued.

“Congress has the ability to shut down the lawsuit by defunding the Department of Justice’s investigative and legal budget,” Norquist wrote.

Noquist’s ‘blueprint” aimed to educate members of Congress “on the realities of the lawsuit” through its outreach to local and state taxpayers groups and think tanks. “One of our strengths is our reputation and credibility at both the state and federal levels of government,” Norquist wrote.

Funding from Philip Morris would cover ATR’s overhead costs for one full time staffer and a part time staffer “to act as liaisons with Philip Morris, track developments, give reports and managing our far reaching outreach programs”.

Lest Philip Morris thought it would only be funding the work of junior staffers the proposal sought to reassure the company that Norquist would play a central role. “Grover Norquist will be writing the op-eds, press releases, and the above mentioned letters as well as scheduling meetings with members of Ocngress”, the proposal stated. Costs for Norquist and the two other ATR staff, however, only amounted to $90,000 of the total budget.

At a cost of $25,000 ATR proposed convening a series of meetings in the states for state leaders and local groups. The proposal flagged that these would then be invited to attend a conference in Washington on Medicare. While the proposal stated the conference would be “ATR sponsored” it sought $200,000 from Philip Morris to organise it.

To shape the debate on federal funding of the legal suit, ATR proposed that it draft a white paper – at a cost of $10,000 - which would be sent to the “top 40 state think tanks with talking points, so that these like minded institutions can create their own policy paper”.

Rather than just adding workload onto the smaller state groups, Norquist proposed adding a financial sweetener. “Offering each think tank a grant of $5,000 will guarantee the groups ability to promote and disseminate their own white paper,” Norquist suggested. “In addition to the think tanks, we will provide $1000 grants to the top 40 taxpayer groups nationwide providing them with the necessary funds to assist the think tanks in getting the message out to the grassroots,” he proposed.

Norquist boasted that the ATR would “aggressively focus on getting the message out” through its in-house “fax blaster which is able to send out 800 faxes a day to radio talk show hosts, newspaper editors and television newsrooms”.

Supplementing the conferences, the barrage of media releases and the dispatch of op-eds to 4000 state and local newspapers, ATR proposed a series of four mailings to key influencers. The draft budget proposed the distribution list be “Members of Congress, Republican State Legislators, State Pledge Takers, Republican Party Officials, State Leaders of Coalition Groups Local Taxpayer Groups”.

However, ATR’s emphasis on the Republican Party caught the attention of Philip Morris. “Democrats” an unattributed hand written notation queried.[34]

It is unclear what the response to ATR's proposal was, but later that years PM’s Federal Tobacco Task Force noted approvingly in an internal report that “Americans for Tax Reform alerted talk radio hosts that this lawsuit was “about spending more money, and consolidating more power and authority in Washington.”

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