This paper limits itself to the revenue effect of Commerce-2. The trust fund, which remains the bill's primary mechanism for the spending and receiving transactions, now contains different accounts to handle the spending provisions stipulated in the bill. These net numbers are reflected in our new estimates. As in Commerce-1, the trust fund created is the entity that receives payments from tobacco producers and makes the disbursements to the various spending programs created by the legislation. Section 403 now provides that the base volume for purposes of adjusting the annual payments to reflect changes in volume is 80 percent of the number of cigarettes sold in 1997.
Inflation adjustments remain the same.
In addition to the increase in the industry-wide penalty for failure to reduce youth smoking, an individual company may also be assessed a penalty if it is deemed to have had a disproportionate share in the reduction failure. The difference between the amounts is 25 percent. JCT also estimates that revenue will be reduced because of less federal excise taxes, that is, as demand for tobacco drops due to price increases, the existing federal excise taxes will bring in less revenues. This results in reduced overall industry payments as well. Commerce-2 defines years as calendar years, while JCT estimates on fiscal years.