Kentuckian Blows Smoke in Face of Bloomberg Tax

The New York Times ^ | 24 November 2002 | DENNY LEE

[SheLion]

Douglas Smith, a chain-smoking mail-order entrepreneur from the coal mining town of Ashland, Ky., wants to share his bad habit. The idea struck last winter, when word of Mayor Bloomberg's proposed cigarette tax increase made the local news.

"I don't know why it aggravated me so much," said Mr. Smith, who smokes three cartons a week. "I'm not even from New York and it makes me angry. It really drives me nuts."

After a few cigarettes, a light bulb went on. "There's an opportunity for people to go in there and make literally millions of dollars," said Mr. Smith, a former landfill operator. With the tax in place, New Yorkers now pay about $7 a pack.

Two months ago, Mr. Smith and a neighbor started El Diablo's Tobacco Shack to sell cheaper cigarettes to New Yorkers. Kentucky has the second-lowest cigarette tax in the country, at 3 cents a pack. Virginia, at 2.5 cents, is the lowest, while New York City is the highest with a combined state and city tax of $3.

Interstate tobacco retailers have grown in recent years. Federal law requires mail-order cigarette customers to pay tax in their own states, but the law is rarely enforced.

El Diablo's is probably alone among the interstate tobacco retailers in marketing only to New York City. Working with a direct-mail company, El Diablo's has started to blanket the city with red-and-white fliers, asking "fellow New Yorkers" if they are tired of paying high prices for cigarettes. Of the 250,000 pieces mailed so far, 10,000 have replied yes, Mr. Smith said.

Newport menthols, traditionally marketed to blacks and Latinos, are the most popular. People in the South Bronx and eastern Brooklyn have been big buyers.

"We just figured that's where the working-class people are," Mr. Smith said. "Most of your smokers are people who can't afford the extra taxes." To that end, El Diablo's accepts payments not only by credit card, but also by personal check and even c.o.d. These easy-payment options don't sit well with some observers.

"I've never heard of this before," said Eric Lindblom, a policy analyst for the Campaign for Tobacco-Free Kids, a Washington advocacy group. "It's preying on poor people." Like Mayor Bloomberg, Mr. Lindblom voices hope that the higher taxes will be an incentive for people to quit.

Mr. Smith sees it differently. "Our plan is to make sure everybody has access," he said. "People have the right to smoke. I'm waiting for Bloomberg to quit drinking, so he'll start calling for prohibition."

[Gabz]

I don't know where Springfield is - but I'm sure it is not on the Eastern Shore.

We live in Dover. You didn't say where in Delaware your wife is from - but I would venture to say you are better off in springfield than here.

[billhilly]

Just kidding. My wife grew up in Wilmington, but we have lived in Springfield almost thirty years. It is just south of Washington about twelve miles.

What brought you to Delaware, and where in Virginia do you plan to move to?

[Gabz]

I figured you were just kidding!!!

I came to Delaware in 1982 for my first job in radio as a reporter/newscaster. Have been here ever since.

Our plan is for Accomac county on the Eastern shore - 2 hours south of here. Reminds my husband of what dover was like when he moved here in 1963 when he was 8.

[billhilly]

I am a long time admirer of everything Eastern Shore. I know Accomac and used to cross the bay on a ferry from Little Creek (Virginia Beach) to Kiptopeake (near Cape Charles) on Virginia's eastern shore. My first trip to Ocean City was in 1958.

My wife and I were married in Rehoboth in 1969 where my wife's parents lived then. Her uncle, who is her age, lives in Milford on a beautiful lake. I have a hunting lodge about forty five minutes from Dover, in Church Hill, Maryland.

[billhilly]

Forgot to mention that your FR name makes sense, in view of the fact that you are in radio. Also forgot to mention that a brother was stationed once at Dover AFB.

[Gabz]

Rehoboth and Milford are still OK - the northeast liberal mindset hasn't really taken over down there yet!!!!!!!

I'm familiar with that string of lakes in Milford - yes, it is beautiful there.

[Bonaparte]

We're probably talking past eachother. Nobody denies that California is collecting a lot of money on tobacco taxes. What I'm telling you is that the state is taking a net loss averaging 300 million per year due to an estimated 20% of sales going "underground" (internet, black market, cross-border, etc). This is a huge loss of revenue and the percentage of Californians spending their tobacco dollar off the tax man's radar is growing. The democrats in Sacramento are going to boost the cost per pack up to about $8 (= NYC price) in an effort to compensate for these losses. They are also making noises about "stepped up enforcement" on excise tax collection. But neither of these stop gaps can succeed. At $8 per pack, very few people will be able to buy from California retailers and the percentage of those buying by out-of-state mail order, etc. will spike dramatically. IOW, California is rapidly reaching the point of diminishing returns and out-of-state retailers are already mass mailing their fliers. I've received a couple of them in just the past two months or so. Why would anybody pay $8 for a pack at the corner store when he can just pick up the phone and have them delivered to his door for $1-$3 per pack?

[billhilly]

A friend of mine, also from New York was a broadcaster with CBS Radio. His name is Dan Scanlon. He retired a few years ago.

[Gabz]

LOL!!!!! My FR name has nothing to do with my being in radio - I've been called Gabz since I was a toddler - my first name is Gabrielle. Although most people who know me would agree with your assessment!!!!

My husband tells me that I won't have a chance to miss the sound of the planes because of the various military installations on the Chesapeake.

I've yet to find one, but I want one of the bumper stickers that proclaims "Jet Engines, the Sound of Freedom" to go along with minethat say "I smoke and I Vote," "Land of the Free, Except Delaware," my NRA logo and the one seeking to ban the Governor of delaware!!!!

[Dianna]

LOL!! Guess what I've asked my husband to buy me for x-mas?

[wcbtinman]

"I don't know what else to do here."

Try a different box.

[SheLion]

Why would anybody pay $8 for a pack at the corner store when he can just pick up the phone and have them delivered to his door for $1-$3 per pack?

Shopping cheap is the American Way. Why do they fault us for this? And what did the lawmakers figure when they raised cigarette taxes through the roof. That we would continue to pay it? I don't THINK so, especially when the United States is huge, and we can get overnight Express a lot cheaper.

[SheLion]

Guess what I've asked my husband to buy me for x-mas?

The rolling machine????

[ATOMIC_PUNK]

lol good on ya youll find after a while the smokes taste better because you have no fillers in roll your owns

[SheLion]

lol good on ya youll find after a while the smokes taste better because you have no fillers in roll your owns

It's been 17 months that we have been RYO, and I know that they do not have all the extra "stuff" in them. I like that.

[Publius6961]

You are absolutely right about everything you say.
My point is that it is a tactical victory but a strategic disaster to allow selective taxation at any stage of the prohibition process.

[Bonaparte]

To simply allow it, to any degree at all, is foolhardy. No argument there. However, before directly defying the state's power to tax, it's wise to ask ourselves if this is the ditch we want to die in. Much better, to my mind, is to make collection of the tax cost them more than it's worth. That's why I've gone on a rampage against California. I cost them thousands of dollars every year and I show others how to do the same thing and save lots of money while doing so. Last summer, when I heard that the state legislature was going to bump the cost of a pack to $8, I was ecstatic and still am. It will make it that much easier for me to help them kill the goose that lays their golden egg. California is now ~27 billion in debt. When that figure reaches 100 billion and nobody will extend this state credit, I will have accomplished my goal.

[Bonaparte]

"Shopping cheap is the American Way."

Absolutely! When we were still living under the Articles of Confederation, states were imposing prohibitively high duties on eachother's goods. By the time the Constitutional Convention put a stop to that with the commerce clause, things had already gotten quite ugly. Americans do not like being gouged, nor do they like being told who they can and can't do business with. The present-day state "excise" taxes are nothing but an attempt by states to regulate interstate commerce.