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Those payments stem from a 1998 agreement to settle lawsuits filed by state attorneys general to recover health costs caused by smoking. North Carolina's share, about $142 million this year, is split three ways. The Golden LEAF Foundation, a nonprofit corporation, gets 50 percent of the money and makes economic development grants in tobacco-dependent communities. The rest is divided between two state bodies: the N.C. Tobacco Trust Fund Commission and the N.C. Health and Wellness Trust Fund.

Brown said that North Carolina would lose up to $12 million in tobacco settlement payments each year under the Senate's version of the excise tax increase. Those payments are tied to the volume of cigarettes produced by manufacturers.

"For us, any hit like that would be very difficult," said William Upchurch, executive director of the Tobacco Trust Fund Commission, which gives money to individuals displaced by the decline of tobacco consumption.

A jump in the federal excise tax also would reduce income from North Carolina's own excise tax -- 35 cents per pack -- by as much as $12 million a year, according to Brown's estimate.

Down on the farm, the federal tax could trim up to $16 million from tobacco crop sales, a blow softened by exports. North Carolina produces 72 percent of the highest-grade flue-cured tobacco grown in the United States, but more than half is sold overseas, said Loren Fisher, tobacco extension specialist at NCSU.

Fighting the raise

North Carolina politicians say they will fight the tax increase but know they have to tread carefully because of the popularity of the child health care program, which gives federal grants to states that provide health insurance to low-income children.

Sens. Richard Burr and Elizabeth Dole, both Republicans, oppose the tax increase but support the child health program. Brian Nick, chief of staff for Dole, said his boss will support an alternative bill sponsored by two GOP Senate leaders that wouldn't increase the excise tax.

A loose coalition of tobacco companies, convenience store owners and conservative think tanks also opposes the measure, saying an excise tax is a regressive levy that places an unfair burden on low-to-middle income people who happen to have a socially unacceptable habit. They also say proponents of the tax increase use faulty logic in claiming the levy will both decrease the number of smokers and provide the children's health program with a sound source of revenue.

"This is a popularity contest, not a policy contest," said Tommy Payne, spokesman for Reynolds American Inc., the parent company of the Winston-Salem-based cigarette manufacturer.

(News researcher Denise Jones contributed to this report.)

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