Legislation recently cleared by the House of Representatives to give the Food and Drug Administration power over cigarettes would save the federal government some money but seriously dent tax revenues collected by states, a congressional report said on Tuesday.

The bill, which passed earlier this month, would also cost the multibillion-dollar tobacco industry $235 million in 2010 and more than $500 million a year by 2013, the Congressional Budget Office said.

It would save the federal government $5 million over five years and $2 million over 10 years, in part by reducing healthcare costs, the CBO estimated.

But state and local governments, which collected about $19 billion in 2008 from taxes on tobacco products, would lose more than $1 billion from 2010 to 2014.

“The amount of tax revenues and settlement funds collected by state and local governments would decline as a result of the federal regulations authorized by this legislation because of lower consumption of tobacco products,” the report said.

The bill, sponsored by House Energy and Commerce Committee Chairman Rep. Henry Waxman, a California Democrat, passed the House earlier this month but must still be cleared by the Senate and signed by President Barack Obama to become law.

Massachusetts Democrat Sen. Edward Kennedy, head of the Senate health committee, plans to introduce his version of the bill after Congress returns to work next week, his spokeswoman Melissa Wagoner said.

Waxman’s bill calls for the FDA to set up a new center to regulate the marketing of cigarettes and other tobacco products as well as control nicotine content and package labels. It would charge tobacco companies user fees to pay for the agency’s new workload.

Altria Group Inc’s Philip Morris unit, the nation’s largest cigarette maker, supports the bill, as do some smaller companies. But others, such as Reynolds American Inc’s R.J. Reynolds Tobacco unit and Lorillard Inc’s Lorillard Tobacco Co, oppose it.

Additionally, the CBO estimated that Waxman’s bill would reduce the number of children and teenagers who smoke 11 percent by 2019 and further curb the number of adult smokers by about 2 percent after 10 years.

WASHINGTON (Reuters)