CA: Feds say Democrats' cigarette tax bills would aid terrorism

SACRAMENTO — An emerging new tale of age-old certainties — taxes and death — begins in California with the flip of a cigarette butt and ends in Iraq with a bullet hitting a U.S. soldier.

Democratic legislators from the Bay Area and Los Angeles, focused on quality of life in the state, are pushing three bills that would increase cigarette costs for litter cleanup or easing deficit pressures.

But federal terrorism investigators told the The Daily Review on Thursday that such seemingly innocent legislation, further increasing high cigarette costs in California, would fuel their already tough battle against terrorist groups' lucrative smuggling operations in the United States.

The disclosure by federal law enforcement officials comes as they are beginning to crack down on illegal cigarette smugglers, who are providing a growing and crucial part of funding to terrorist groups such as al-Qaida and Hezbollah.

Two new reports by a federal watchdog agency, the U.S. General Accounting Office, detail the multibillion-dollar problem. Each is about 50 pages long. One was sent to Congress and the other to U.S. law enforcement agencies.

A smuggler transporting cigarettes from a low-tax state to a high-tax state, and selling them at a discount, can make about $2 million on a single truckload of cigarettes, according to the reports.

When informed of the new concern about a decades-old problem of black market cigarette sales, conservatives and anti-tax groups cheeredRepublican Gov. Arnold Schwarzenegger's stance against tax increases in general and federal officials' efforts, while attacking the California legislation.

Conservative columnist and radio talk-show host Geoff Metcalf, a nonsmoker, said the illegal proceeds "are going directly to funding bad guys killing Americans."

"The money is huge and, if caught, the punishment is way less than dealing drugs," he said.

The three lawmakers who authored the bills — Assemblywoman Fran Pavley, D-Woodland Hills, and Sens. Tom Torlakson, D-Antioch, and Wes Chesbro, D-Arcata — were unavailable for immediate comment.

Aides and legislative analysts said the bills are aimed at worthy causes, obviously not at supporting terrorism.

"The illicit sale of cigarettes and other commodities by terrorist groups and their supporters has become a crucial part of their funding activities," said William Billingslea, a senior intelligence analyst for the Office of Strategic Intelligence and Information in the Bureau of Alcohol, Tobacco, Firearms and Explosives in Washington, D.C.

"Raising the tax on cigarettes widens the difference between the wholesale and retail price and inadvertently creates opportunity for traffickers, who evade the tax and gain the profits," he said. "Cigarette traffickers can make as much as $60 per carton.

"Illicit cigarette trafficking now rivals drug trafficking as the method of choice to fill the bank accounts of terrorists," Billingslea said.

"Each state that raises its cigarette taxes is a new prospect for illicit profits gained by trafficking in cigarettes."

Only one of the bills among the three would directly impose a tax increase on cigarettes. It is sponsored by Torlakson, who has supported tax increases in the past for specific needs, saying he is committed to "taking bold action to protect the lives and well-being of real people."

Proceeds from his measure would be used to fund health programs for poor children.

The Pavley and Chesbro measures are aimed at kicking smokers' cigarette butts off the California landscape. They would impose fees on cigarette makers and distributors to raise funds for litter cleanup — a cost that likely would be tacked onto the cost of the product.

More than a dozen Democratic lawmakers from the Bay Area and Los Angeles are co-sponsoring each of the bills.

A bill by Assemblywoman Jenny Oropeza, D-Long Beach, approaches the problem differently, boosting smokers' fines for cigarette-butt littering. She also is sponsoring a bill aimed at bolstering trespassers' penalties at seaports.

"In a changing world and amid increased awareness of terrorist threats, all safety violations must be taken seriously," she said. "It only makes sense that a security violation at our seaports must be prosecuted the same as a security violation at our airports."

The federal Bureau of Alcohol, Tobacco, Firearms and Explosives has more than 300 open cases of illicit cigarette trafficking — including several with terrorist links — up from only a handful five years ago, according to federal officials.

"The deeper I dig into this issue the angrier I get," Metcalf said. "When I share the information with other veterans and active duty military, the most common reactions are unprintable."

What smokers in California already pay with cigarette taxes:California Information

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Tobacco Taxes

California's excise tax per pack of cigarettes: $0.870
California's excise tax collection for the
fiscal year ending June 2002: $1,074,323,000

Sales tax on tobacco products: 7.25%

Federal excise tax per pack of cigarettes: $0.39
Total federal excise tax collections in fiscal year 2002: $7,512,700,000

Click here for the Cigarette Tax and Payment Table for all states.

Comparing Excise Taxes on Cigarettes, Beer and Wine

click for larger view

Number of six-packs of beer that must be sold in California to produce the same state excise tax revenue generated by one carton of cigarettes: 77.3

click for larger view

Number of bottles of wine that must be sold in California to produce the same state excise tax revenue generated by one carton of cigarettes: 219.6

California Smokers' Contributions
to the State Economy - 2002

California smokers comprise only 17.2%¹ of the adult population in the state. Here is what they already pay because they choose to buy a legal product:

Smokers Pay Excise Taxes²	$	1,074,322,864
Smokers Pay Sales Taxes²	$	333,410,544
Smokers Pay Tobacco Settlement Payments³	$	913,332,154
	$	2,321,065,562

Smokers' Economic/Tax Profile

Income

California smokers' median income 2001¹

35,620

California State Tax Liability for Median Income Smoker⁴

Annual state income tax liability for a couple	$	370
Annual state income tax liability for a couple with two children	$	212

Smoker Excise Tax/Sales Tax/Tobacco Settlement Payments Liability⁵

Total average paid per California smoker in excise and sales taxes	$	332
Cost per California smoker for settlement payments to California	$	216
Total annual payment to California per smoker	$	548

California Smoker Facts⁶

Total smokers' payments to California in FY2002 were:
- Eight times as large as state excise taxes on alcohol in FY2001 ($288.5 million).
- Larger than occupation and business license revenues ($1.7 billion) in FY2001.
- Two and one-half times as large as the Estate, Inheritance, and Gift tax collections ($934.7 million) in FY2001.
- Larger than the Insurance Gross Premium tax revenues ($1.5 billion) in FY2001.
Smokers' payments in FY2002 were large enough to provide for estimated FY2002 expenditures for:
- The California Highway Patrol ($960.6 million).
- The Department of Parks and Recreation, including local assistance ($1.4 billion).
- The California Environmental Protection Agency ($1.6 billion).
- Public Health Services ($727.1 million).
- Department of Mental Health ($995.9 million).
In 1997, approximately 27,873 Californians held jobs related to the sale or distribution of tobacco products. Those jobs resulted in an additional $45.8 million to the state in personal and corporate income taxes.⁷

TOTAL SMOKER CIGARETTE PAYMENTS TO CALIFORNIA

Per year:	$	2,321,065,562
Per day:	$	6,354,731
Per hour:	$	264,780
Per minute:	$	4,413
Per second:	$	74

CIGARETTES DON'T PAY TAXES -
CALIFORNIA SMOKERS DO!!

Centers for Disease Control's Behavioral Risk Factor Surveillance System, 2001
Orzechowski & Walker, Arlington, Virginia; latest estimates from state revenue department
PriceWaterhouseCooper
State annual income tax liability from PayBreeze software of General Programming, Inc., San Jose, California, which utilizes the Exact Calculation Method.
U.S. Census Bureau, 2000 state population and Centers for Disease Control's Behavioral Risk Surveillance System, 2001
Tax and Budget Comparisons are from the U.S. Census and the California Department of Finance, Governor's Budget Summary, 2002-2003, Jan. 2002. Online at http://www.dof.ca.gov/HTML/BUD_DOCS/Bud_link.htm.
American Economics Group, Inc., The U.S. Tobacco Industry in 1997: Its Economic Impact in the States.

Master Settlement Agreement Payments To Date

$2,976,489,684 has been paid to California since the Master Settlement Agreement was signed on November 23, 1998.

California Tobacco Laws

A summary of California state law is provided below
(for specific questions regarding state law, contact your legal advisor.)

Minimum Age	Customers must be 18 years or older to purchase tobacco products. Sellers of tobacco products shall check the identification of tobacco purchasers, to establish the age of the purchaser, if the purchaser reasonably appears to be under 18 years of age.
Acceptable Forms of Identification	A document issued by a federal, state, county, or municipal government, or subdivision or agency thereof, including, but not limited to, a motor vehicle operator's license or an identification card issued to a member of the Armed Forces, which contains the name, date of birth, description, and photograph of the individual.
Restricted Products	Any substance containing tobacco leaf, including, but not limited to, cigarettes, cigars, pipe tobacco, snuff, chewing tobacco, or dipping tobacco. Restricted products also include cigarette papers and any other instrument or paraphernalia that is designed for the smoking or ingestion of tobacco products or any controlled substance. No person shall sell, offer for sale, distribute, or import any tobacco product commonly referred to as “bidis” or “beedies,” unless that tobacco product is sold, offered for sale, or intended to be sold in a business establishment that prohibits the presence of persons under 18 years of age on its premises.
Fine/Penalty Schedule for Selling to Minors	Violators will be subject to either a criminal action for a misdemeanor or a civil action punishable by a $200 fine for the first offense; a $500 fine for the second offense; and a $1,000 fine for the third offense. Under the STAKE Act, the California Department of Health Services has the authority to assess civil penalties of up to $6,000 against the owner(s) of the retail business. Any person who violates the section regarding the sale of "bidis" is guilty of a misdemeanor or subject to a civil action brought by the Attorney General, a city attorney, county counsel, or district attorney for an injunction and a civil penalty of up to two thousand dollars ($ 2,000) per violation. Upon the first conviction, the retailer shall receive a warning letter explaining the circumstances under which a retailer's license may be suspended or revoked and the amount of time the license may be suspended or revoked. The retailer and its employees shall receive training on tobacco control laws from the Department of Health Services upon a first conviction. For the second conviction within 12 months, the retailer shall be subject to a fine of $500; for the third conviction of a violation within 12 months, the retailer shall be subject to a fine of one thousand dollars ($1,000); for the fourth through seventh conviction of a violation, the board shall suspend the retailer's license to sell cigarette and tobacco products for 90 days; for the eighth conviction of a violation within 24 months, the board shall revoke the retailer's license to sell cigarette and tobacco products.
Minor Possession	Every person under age 18 who purchases, receives or possesses tobacco, cigarettes, cigarette papers, or any other preparation of tobacco, or any other instrument or paraphernalia that is designed for the smoking of tobacco, products prepared from tobacco, or any controlled substance, is subject to a fine of $75 or 30 hours of community service.
Sign Requirement	The STAKE Act requires that every person, firm, or corporation that sells, distributes, or deals with tobacco products, conspicuously post a notice — so that it is likely to be read by a consumer during the sale — at each point of purchase which states that selling tobacco products to minors is illegal and subject to penalties. The notice shall state that the law requires that all persons selling tobacco products check the identification of any purchaser of tobacco products who reasonably appears to be under 18 years of age. The notice also must include a toll-free number for persons to report violations to the California Department of Health Services. Per Title 17 California Code of Regulations Section 6902, the sign must be square in shape and no smaller than 5.5. inches high by 5.5 inches wide (30.25 square inches) or be rectangular in shape and no smaller than 3.66 inches high by 8.5 inches wide (31.11 square inches). A sign may be larger; however, the sign shall be proportionate to one set of the dimensions set forth above. The sign must contain the following words with initial letters capitalized as shown, printed (in medium or bold Helvetica or Futura typeface) in black ink on white paper or dark blue ink on yellow paper or other high contrast format: The Sale of Tobacco Products to Persons Under 18 Years of Age is Prohibited by Law and Subject to Penalties. Valid Identification May Be Required. (top and side margins must be at least 1/3 inch, no smaller than 20 point) To Report an Unlawful Tobacco Sale Call 1-800-5ASK-4-ID. (side margins must be at least 1/3 inch, no smaller than 30 point and at least 6 points larger than all other text)Business and Professions Code Section 22952. (side and bottom margins must be at least 1/4 inch, no smaller than 12 point) Failure to post the required notice could result in a fine of $10 for the first offense, and $50 for subsequent offenses or imprisonment for up to 30 days. To obtain California STAKE Act signs free of charge for every retail point-of-sale, call 1-800-5-ASK-4ID. Click here to see an example of the California STAKE Act required sign. For a more detailed review of Title 17, California Code of Regulations Section 6902, Click Here.
Compliance Checks	As a condition of receiving federal substance abuse block grant funds, federal law requires the State of California to conduct random, unannounced inspections of tobacco outlets to determine compliance rates. The Department of Health Services coordinates the inspections and the Department and local law enforcement may use persons 15 -16 years of age.
DISCLAIMER: This information summary is provided as a service of the Coalition, but is not intended to provide legal advice or analysis. These summaries are not intended to be complete representations of state law, which may contain additional rules and restrictions relating to tobacco products not mentioned in this summary, as well as retailing prohibitions related to matters including, but not limited to, state required training, minimum pack size, the sale of loose cigarettes and other restrictions. Retailers should not rely on these summaries as complete or accurate descriptions of applicable federal, state or local law. Users with questions about the law should seek the advice of counsel. Each state law is unique and possibly represents multiple legislative or regulatory acts. Local laws may differ. Check with local authorities for variations from state law. These summaries are not intended to be complete representations of state law.

The reprinting of this information from the Coalition, does not constitute a representation or admission by RJRT that such information is accurate, complete, or a proper characterization of the laws concerned. The Coalition for Responsible Tobacco Retailing is a cooperative effort among retailers, wholesalers and manufacturers who share a common goal: to do all they can to prevent tobacco sales to minors.

California Department of Health Services
Tobacco Control Section

Request for Proposal
for
Tobacco Education Clearinghouse of California
TCS-02-25400
July 18, 2002

June 25, 2004
To Marin LJ Opinion Page
Re: Stepford County?

Dear Editor-

Ostensibly in the name of "Health", the display of the NAME of Miller Brewing Company is being stripped from its six-year sponsorship of live big-name bands at the upcoming Marin County Fair this Fourth of July weekend [IJ, front page, Thur. June 24]. For now, their BEER will still be for sale there. Armed with $8,500 in ready cash, a just-minted group calling itself the "Play Fair Coalition", with a 5-year plan to drive Miller's (and their predecessor, Budweiser's) name from view at the Fair, will instead have its OWN name there, for the first time in the nation. Somehow, this is supposed to help people who have trouble using alcohol responsibly.

I'm very skeptical, as was the former Special Master who supervised the Marin Community Foundation's and the Marin Institute's use of Beryl Buck's legacy funds, of this so-called "environmental approach" to dealing with drug and alcohol problems.

Who ARE the partners in this new "Play Fair Coalition"? The Marin County Department of Health and Human Services, Marin Community Foundation, Marin Institute, Healthy Marin Partnership, Youth Leadership Institute and Bay Area Community Resources. Where did the money come from? Possibly from the $8 billion Robert Wood Johnson Foundation of Princeton, NJ (the largest stockholder in Johnson & Johnson), which gave nearly $1 million to the food and drink critics at the "Center for Science in the Public Interest" between 1998 and 2001, and $87,007 to the Marin Institute (for Alcohol and other Drug Problems) between 1996 – 2000, according to the ActivistCash.com website. With the County budget in the shape that it is, I hope there were no public funds from the Department of Health & Human Services used for this brazen act of commercial censorship.

Only time will tell if this group will mount further interference with the food and drinks being offered at the County Fair, but I see a disturbing start here. And no, I personally don't drink much Miller beer. When Ioccasionally have one, I prefer a brew from Mexico that was created by a German emigrant to celebratethe new Millennium - in 1900. I also have no financial interest in either company - just an abiding belief thatthe Fourth of July is about celebrating and enjoying freedom, not social
engineering.

Terry Niksch
San Rafael, CA

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