North Carolina’s tobacco industry faces a significant challenge as the Trump-backed “One Big Beautiful Bill” includes a hidden tobacco tax that threatens the state’s agricultural backbone. North Carolina, with its tobacco farms and industry-related jobs, triggering widespread concern who warn about the far-reaching economic consequences. Will the Senate address the tobacco tax in the bill?
The Hidden Tax in Trump’s “Big Beautiful Bill”
The “One Big Beautiful Bill” (HR 1) that recently passed the House contains a provision that would effectively create a new tax on tobacco products by removing them from the federal duty drawback program. Section 112032 of the bill specifically targets tobacco, breaking with over 200 years of trade policy that has promoted American exports and prevented double taxation on products sent overseas.
This change threatens to disrupt North Carolina’s economy, where tobacco contributes over $30 billion annually to the state’s GDP and supports nearly 200,000 jobs. The North Carolina Chamber and the Tobacco Growers Association have voiced strong opposition to the provision, estimating it could cost the industry approximately $100 million each year.
Once again why are we trying to pass bills that are over 1,000 pages long?
Well, so the politicians can enrich themselves by pushing absolute crap inside a massive bill!
How about this: One page bills containing ONLY one item to vote on!https://t.co/rSK1Cyd8zg
— J.J. Carrell (@JJCarrell14) May 26, 2025
Economic Impact on North Carolina’s Agricultural Sector
North Carolina remains a major tobacco-producing state with more than 800 farms dedicated to growing the crop across its fertile regions. The duty drawback program has been crucial for allowing U.S. tobacco farmers to compete in global markets, with the industry contributing over $1 billion and supporting 7,470 jobs to North Carolina’s economy.
Ending the drawback program would particularly harm smaller manufacturers and growers who rely on export markets, potentially leading to industry consolidation and reduced competition. Donald Bryson from the Carolina Journal emphasized this point, stating: “When Congress taxes a product that can never reach American consumers, it violates a basic principle of sound tax policy: tax neutrality.”
PASSED: THE ONE BIG BEAUTIFUL BILL ACT.
House Republicans just passed this HISTORIC piece of legislation FOR YOU. pic.twitter.com/keVGJstR6c
— House Republicans (@HouseGOP) May 22, 2025
Potential Amendments in the Senate
President Trump has indicated openness to Senate modifications of the bill, acknowledging that changes may be necessary. “I want the Senate and the senators to make the changes they want,” Trump stated, adding, “In some cases, those changes may be something I’d agree with, to be honest… Some will be minor, some will be fairly significant.”
Senate Majority Leader John Thune has confirmed that Senate Republicans are interested in revising parts of the legislation. “I’m a regular order guy. I think you can improve the product,” Thune remarked, signaling that the Senate intends to leave its imprint on the bill before final passage.
Industry advocates emphasize that the drawback program does not encourage tobacco consumption since it applies only to exported or destroyed products, not those sold domestically. The tobacco industry remains hopeful that Senate amendments will restore the historical trade protections that have helped maintain American competitiveness in global markets for more than two centuries.