Virginia was once considered the largest and richest of the original 13 colonies, in part thanks to its flourishing tobacco farms. But the double drawback tax loophole, which foreign tobacco companies exploit to receive U.S. tax refunds, puts the entire American tobacco industry at risk. And while President Trump tried to end this loophole, the courts determined it was Congress who must be the ones to close it for good. Now, with the House of Representatives doing the right thing, we need our Senators to follow suit and help Virginia’s tobacco farms, many of them small family businesses, survive and flourish.
The “double duty drawback loophole” policy oversight has already cost taxpayers and is estimated to cost more than $12 billion over the next decade. The loophole has, in essence, allowed foreign tobacco companies to get a refund for importing their product to the U.S., escaping the same excise taxes that are still paid by domestically based companies. This means that since 2015, American taxpayers have been subsidizing foreign cigarette manufacturers.
The fact this has gone on unabated for so long is an insult to every farmer and taxpayer who is tired of seeing their hard-earned wages go to waste, particularly at a time when our country is facing a crippling national debt and tackling waste, fraud and abuse are top-of-mind. Fortunately, lawmakers in Washington are finally taking notice.
Watching billions of dollars walk out the door as foreign companies exploit a tax cheat is outrageous, but efforts to eliminate the loophole have failed thus far, thanks to lobbyists and unfavorable court rulings. At a time in our political atmosphere when almost nothing is bipartisan, an issue like closing this loophole is so obvious that it is bringing lawmakers together.
With the House of Representatives version of the “Big Beautiful Bill,” Congress would end the double duty drawback loophole and level the playing field for U.S. tobacco companies and farmers. It would finally stop the foreign companies from avoiding our country’s taxes at the expense of our citizens, sending a clear message that Congress is paying attention to the needs of the farmers who provide crucial services to our economy.
But now it is up to the Senate, where I hope Virginia lawmakers, alongside their colleagues, will ensure this provision remains in the final bill to secure what should be an easy win for not only Virginians but all Americans. Closing the double duty loophole is a commonsense move, and it’s a policy fix that’s long overdue.
Eric Phillips represents the 48th District in the House of Delegates. He is a Republican.