US states rake in cigarette revenues, hunt evaders

Forbes.com ^ | 30 October 2002 | Christina Ling

[SheLion]

WASHINGTON (Reuters) - Massive increases in cigarette taxes that 20 U.S. states are enacting to help plug gaping budget holes are so far swelling coffers as expected despite also raising sales of "contraband" smokes, states say.

But with the outlook for annual income from the tax unclear after the current 2003 fiscal year and an end to budget woes nowhere in sight, states are cracking down on Internet vendors, American Indian reservations and others who do not collect tobacco taxes.

"We factored in people quitting, going out of state and going on the Internet," said Tim Connolly, a spokesman for the Department of Revenue in Massachusetts, where the tax rose from 75 cents to $1.51 per pack on July 25.

Massachusetts expects to add $190 million to cigarette tax revenues by the end of fiscal 2003 on June 30, for a total $462 million that will be spread between the general fund and two pots of money dedicated to state health care programs.

Like almost every state, Massachusetts' tax revenues have repeatedly come up short because of the economy's weakness; Acting Gov. Jane Swift just this month slashed another $200 million in spending from the $23 billion budget.

While cigarette taxes represent just a small fraction of total revenues for most states, lawmakers are scraping pennies from every source available with revenues sinking ever lower and reserve funds down to a final trickle.

States faced a total budget deficit of $58 billion going into fiscal 2003 after closing a collective deficit of $36 billion in fiscal 2002, the National Conference of State Legislatures says.

Not all 20 states have had a chance to document the revenue effect of their tobacco tax hikes; most made the increased excises effective only in June or July, while Michigan and Louisiana waited until August and Nebraska until October.

But officials in Washington, Connecticut and Maryland, where taxes rose earlier in the calendar year, say they are already seeing the higher revenues they projected despite a drop in sales of taxable packs of cigarettes.

"We're selling 19 percent fewer (taxable) packs but because the tax is so much higher we're still bringing in more money than we were in the past," said Mike Gowrylow, a spokesman for the revenue department in Washington state, where the tax rose to $1.42 per pack from 82.5 cents on Jan. 1.

HOOKED ON REVENUE

State fiscal analyst Iris Lav, the deputy director of the Washington, D.C.-based Center of Budget and Policy Priorities, said states would add to their fiscal woes if they relied on a sustained level of income from the tax in 2004 and beyond.

"You have a downward trend in smoking ... What happens to whatever the cigarette tax is funding?" Lav said. "Next year the services they are supporting will cost 4 or 5 percent more and the revenue will be 1.5 or 2.5 percent less."

While Connecticut officials said they had taken into account the falling numbers of smokers in its lower 2004 tobacco tax revenue projection, Maryland estimates income rising to $275 million in 2004 from $212 million this fiscal year.

Regardless of their revenue projections however, all states are dusting off their copies of a federal law called the Jenkins Act in an effort to crack down on tax evaders.

The law requires vendors to report cigarette sales across state lines to the state tax authorities where the customer lives so that the state can assess tax on the tobacco.

But a congressional watchdog in August found that merchants often flout it -- many of the American Indian tribes operating shops on their reservations or advertising over the Internet say they are not bound by the Jenkins Act's precepts.

Such operations could cost state coffers $1.4 billion in unreported Internet tobacco sales by 2005, according to a report cited by Congress' General Accounting Office.

Massachusetts' Connolly said his office was redoubling efforts to contact Internet merchants and Connecticut Revenue Commissioner Gene Gavin said his office was preparing a lawsuit against Jenkins Act violators.

U.S. Rep. Marty Meehan, a Massachusetts Democrat, has launched an effort to amend the law to address states' concerns that the law's penalties are not sufficient and that they do not have the resources to police it.

"We send information along to the FBI ... but they're all out chasing terrorists these days and this frankly doesn't get a lot of attention," Washington's Gowrylow said.

Copyright 2002, Reuters News Service

[SheLion]

states are cracking down on Internet vendors, American Indian reservations and others who do not collect tobacco taxes.

YES! LIKE HOW????? You will have to go after the whole internet before you nail cigarette sales! How about EBAY? Why don't you start THERE first!

"We factored in people quitting, going out of state and going on the Internet," said Tim Connolly, a spokesman for the Department of Revenue in Massachusetts, where the tax rose from 75 cents to $1.51 per pack on July 25.

DREAMER. If that is so, why did you "factor in people going elsewhere?

The law requires vendors to report cigarette sales across state lines to the state tax authorities where the customer lives so that the state can assess tax on the tobacco.

DREAMER

states are cracking down on Internet vendors, American Indian reservations and others who do not collect tobacco taxes.

Read what ONE Chief says about this:

Read Their Lips: No Taxes/New York

MASTIC, N.Y. — Call it tax avoidance — and call it completely legal. When asked how many cartons of cigarettes he sells per month, Chief Wallace, a stocky man wearing two braids, denim shorts and flip-flops, responded, "It's none of your business."

While cigarette taxes represent just a small fraction of total revenues for most states....

SMALL????!!!!!!

"You have a downward trend in smoking ..

DREAMER

INDIANA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

CALIFORNIA SMOKERS' CONTRIBUTION TO THE STATE ECONOMY - 2001

MICHIGAN SMOKERS' CONTRIBUTION TO THE STATE ECONOMY - 2001

ILLINOIS SMOKERS’ CONTRIBUTIONS TO THE STATE ECONOMY - 2001

MASSACHUSETTS SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY-2001

DELAWARE SMOKERS' CONTRIBUTIONS TO THE STATE ECOMOMY -2001

NEW YORK CITY SMOKERS' CONTRIBUTIONS TO THE STATE ECOMOMY -2001

RHODE ISLAND SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY 2001

TEXAS SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

PENNSYLVANIA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

MISSOURI SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

LOUISIANA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

HAWAII SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

TENNESSEE SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

OREGON SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

NEW JERSEY SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

INDIANA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

ARKANSAS SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

GEORGIA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

MISSISSIPPI SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

MONTANA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

SOUTH CAROLINA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

WEST VIRGINIA SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2001

KENTUCKY SMOKERS'CONTRIBUTIONS TO THE STATE ECONOMY - 2002

MAINE SMOKERS' CONTRIBUTIONS TO THE STATE ECONOMY - 2002

[SheLion]

PUFF

[Reelect President Dubya]

If every smoker quit for a year, it would cause the federal and state governments to implode.

That would be a good thing, in my opinion.

[Lysander]

I don’t smoke anymore, but I have avoided becoming an anti-smoking zealot. (Nothing worse than a former smoker who now hates smokers IMNSHO.) All this while we subsidizes tobacco farmers? Give me my Liberty back.

[Just another Joe]

Stuff your own and plan on growing your own, if possible.
I'm already looking at setting up my garage as a growing room to let plants get an early start before moving them outdoors.

[SheLion]

If every smoker quit for a year, it would cause the federal and state governments to implode.

Well, smokers do NOT have to quit in order to bankrupt the state budgets. MANY of us are now buying off of the Internet, or from the Reservations and rolling our own.

That is why "they" are SCREAMING! They raised the cigarettes taxes through the roof thinking that we are all sheeple out here and drooling from the anticipated money the state would receive. WRONG! Shopping cheap is the American Way!

They never dreamed that smokers would find an ulterior way of buying cigarettes at a resonable price!

and

Smokers United

[Reelect President Dubya]

I'm all for you man. I'm not a smoker, but I believe in freedom, and not just for me.

The only thing I worry about is states like California are subpoenaing the sales records of Internet cigarette sites and going after individual smokers for the unpaid taxes.

Watch your back.

[SheLion]

I'm already looking at setting up my garage as a growing room to let plants get an early start before moving them outdoors.

The only thing with that, Joe, is you need a "grow light." The cops busted some guy down the street because you could actually see his "GROW LIGHT" at night glowing.

Plus, Joe, our summers are SO short and winters SO harsh, that planting tobacco seeds in the yard is out of the question.

As for growing in the basement: well, it's so damp in the summer, and stacked wall to wall with wood in the winter. It's no REC room, that's for sure.

[SheLion]

All this while we subsidizes tobacco farmers? Give me my Liberty back.

Huh? You have a link for that? I think that is just in one state down south.

[Gabz]

Because Delaware DIDN'T raise it's cigarette tax this past legislative session and all surrounding states did cigarette tax revenue increased by 59% in July compared to June and over 50% compared to last July.

The Governor is now calling for a 50cent a pack tax increase to help cover budget shortfalls. If all the candidates stick to their positions as stated in all the papers - she's not going to get it when the legislature returns in january.

Cigarette taxes and the smoking ban have become major and I mean MAJOR campaign issues here this year. I've never seen it so much in the forefront in the 20 years I've been dealing in Delaware politics - it's amazing.

[Wolfie]

When they break out the big gun (asset forfeiture) they won't need a subpeona. Interntet sites will gladly pony up the info.

[SheLion]

I'm all for you man.

ack! I’m not a man……………..

Watch your back.

No need to. We roll our own. Have been for over a year now. Buy our tobacco and filtered tubes downtown. And the cigarette rolling machine off of the net.

[Reelect President Dubya]

ack! I’m not a man……………..

On the Internet, nobody knows if you're a dog. Or a woman, for that matter. You say that you are a woman, and you may well be, but there is no way for me to know for sure. :^)

[Reelect President Dubya]

No need to. We roll our own.

I used to roll my own back in '69 and '70. Sometimes I even used tobacco.

[Just another Joe]

No need to. We roll our own.

Now She, are you ROLLING your own or STUFFING your own?
I know that you can buy the filters seperate and 'roll' them into the paper with the tobacco.
That's why I ask.

[SheLion]

On the Internet, nobody knows if you're a dog. Or a woman, for that matter. You say that you are a woman, and you may well be, but there is no way for me to know for sure. :^)

Oh for heavens sake. I have been on the internet with several sites since 1994. I have MANY people that can vouch that I am a woman. For one thing: you can ask GABZ. She talked to me on the phone.

And Andy from Forces. HE talked to me on the phone.

And Pat from Forces Canada. SHE talked to me on the phone.

No! I am all female, thank you!

[Reelect President Dubya]

It was a joke.

[angkor]

states like California are subpoenaing the sales records of Internet cigarette sites

Have 'em delivered via USPS Priority mail, which is notorious for "losing" cigarette deliveries.

Or order from overseas, where California subpoenas have no authority.

[Reelect President Dubya]

Or order from overseas, where California subpoenas have no authority.

You are a braver man than I.

Governments will kill you over miniscule tax matters. The Branch Davidians were incinerated because of BATF allegations they had not purchased $200 tax stamps for certain AR-15s in their possession that they had been modified by the insertion of autosears.

It is not illegal to own a select-fire AR-15, you just have to pay the $200 annual tax.

[Gabz]

You're my kind of former smoker!!!!!! Thanks for taking your stand.

I understand where you are coming from about the tobacco subsidies, but more and more tose subsidies are for NOT growing tobacco instead of growing it.