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States Brace for Cigarette Backlash
AP via TBO ^ | 7/13/02 | DAVID CRARY

Posted on 07/13/2002 3:18:42 PM PDT by Jean S

NEW YORK (AP) — As state after deficit-ridden state ratchets up cigarette taxes, authorities are bracing for some unwelcome consequences in the form of more aggressive smuggling and bolder use of the Internet as a tax-evading tobacco shop.

Never before have so many states — 17 this year alone — approved cigarette-tax hikes in such a short time. Anti-smoking advocates call it a win-win situation, enabling states to reduce smoking and budget deficits simultaneously.

In many legislatures, even tax-averse conservatives have supported the increases — expected to generate $2.2 billion annually in new revenue — as budget woes and anti-smoking militancy transform cigarette buyers into America's easiest-to-tax constituency.

With prices as high as $7 a pack in New York City, and more than $4 in many states, some smokers are trying harder than ever to quit. Those unwilling or unable to kick the habit are left with several options — legal, quasi-legal and illegal — for getting a nicotine hit without a tax hit.

Those who choose the illegal route are often successful. The Bureau of Alcohol, Tobacco and Firearms estimates state and federal authorities lose more than $1.5 billion annually in evaded cigarette taxes.

The ATF concentrates on major interstate smuggling — operations involving at least 60,000 cigarettes. The workload has increased steadily in recent years; ATF now has about 150 active cigarette-smuggling cases.

``There's no question some large-scale organized crime gangs are involved,'' said ATF spokesman John D'Angelo. ``Not only are these criminals depriving state and federal governments of tax revenue, they're using their profits for other criminal activity.''

The primary sources of smuggled cigarettes are tobacco-growing states with low taxes — for example, Virginia with a lowest-in-the-nation tax of 2 1/2 cents per pack, and Kentucky with a 3-cent per pack tax.

In Ohio, where the tax recently rose 31 cents per pack, officials plan to monitor the Kentucky border for smugglers, and police are being trained to check for Ohio tax stamps on packs sold at stores. A carton of name-brand cigarettes in Ohio costs about $40, compared to about $25 in Kentucky.

In Maryland, where the per-pack tax rose to $1 in June, authorities are on alert for more smuggling from Virginia. There were only five arrests in Maryland for cigarette smuggling in 1997, and more than 50 so far this year.

The Internet — which thus far accounts for only a small fraction of cigarette sales — may pose a bigger long-term threat to tax collectors than smuggling. The hefty tax hikes may prompt more smokers to order in bulk from online merchants, who in turn may resist state efforts to collect taxes.

Under federal law, online cigarette vendors are required to report the names and addresses of out-of-state customers, but the law is widely flouted.

``Most vendors aren't turning over their customer list, so the Internet is becoming a hotbed of tax evasion,'' said Kurt Ribisl, a professor at the University of North Carolina School of Public Health.

Ribisl oversaw a study this year that identified 195 Internet cigarette vendors, up from 88 a year earlier. He said most advertise low-tax cigarettes and indicate they won't report to any authorities.

``We're definitely unprepared right now — we don't have the tools to get the states their proper revenue,'' he said. ``You need federal legislation, because a patchwork approach from individual states is going to bog down.''

In Congress, Rep. Martin Meehan, D-Mass., is leading an effort to tighten regulation of Internet cigarette sales. Meehan's chief of staff, Bill McCann, predicted bipartisan legislation would be drafted this year aimed at enforcing existing requirements that Internet merchants block sales to minors and report out-of-state buyers.

Some states already are sending tax bills to smokers who patronized the Internet.

``They've thumbed their noses at us,'' said Gene Gavin, Connecticut's tax commissioner. ``And they're right, because we don't do anything.''

One legal complication is that many of the Internet sites are run by American Indians. Sales of cigarettes on Indian reservations are exempt from state and local taxes, and some Indian merchants contend their Internet sales also should be tax-exempt.

Larry Ballagh, a Seneca Indian from upstate New York, sells tax-free cigarettes over the Internet.

``Adults who have been smoking for a number of years, they're not going to quit smoking,'' he said. ``But they will shop around.''

Tom Ryan, a spokesman for Philip Morris USA, said the tobacco company supports a crackdown on tax evasion.

``The people really hurt by all this are the retailers who are doing business legitimately.'' he said. ``Jobs are on the line.''

John Singleton, a spokesman for R.J. Reynolds Tobacco Co., questioned whether law enforcement agencies — stretched thin by anti-terrorism duties and tight budgets — have the resources to combat cigarette smuggling.

``It's extremely profitable for those willing to break the law to drive to a low-tax state, load up a van, drive to a state with high taxes and sell them out of the back of a truck,'' he said.

Cigarette taxes can be a reliable revenue source for states if the taxes are ``reasonable,'' Singleton said.

``But with taxes at what a lot of smokers view as an unreasonable level, the states aren't going to get the revenues they're projecting and will find themselves with increasingly hard-to-enforce legal problems,'' he said.

Eric Lindblom of the Campaign for Tobacco-Free Kids disagreed, saying every state which has raised cigarette taxes has boosted revenues despite reduced smoking and cigarette sales. He said tobacco companies highlight tax-evasion problems in hopes of swaying politicians.

``For someone who gets contributions from the industry, these arguments are used as false crutches to support their opposition to tax increases,'' he said.


TOPICS: Government; News/Current Events
KEYWORDS: cigarettesmuggling; cigarettetaxes; pufflist
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1 posted on 07/13/2002 3:18:42 PM PDT by Jean S
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To: JeanS
Take your pick!
2 posted on 07/13/2002 3:25:22 PM PDT by facedown
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To: JeanS
Curses! Foiled Again!

I'll get you next time, Free Market! Next Time!

3 posted on 07/13/2002 3:28:41 PM PDT by irksome1
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To: JeanS
as budget woes and anti-smoking militancy transform cigarette buyers into America's easiest-to-tax constituency

Compare sources here: cigaretteyellowpages.com

Remember the Boston Tea Party? It's about time for a Tobacco Butt Party and butt the elected money-grabbers out.

After they have drained the tobacco/smokers, they will go after other sources of revenue--beer and alcohol, fast foods, colas, the list is endless and each will get a turn at being taxed out of existence.
4 posted on 07/13/2002 3:33:41 PM PDT by TomGuy
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Comment #5 Removed by Moderator

To: JeanS
How much are tobacco seeds, and where can I get some?
6 posted on 07/13/2002 3:34:49 PM PDT by Chewbacca
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To: JeanS
Anti-smoking advocates call it a win-win situation, enabling states to reduce smoking and budget deficits simultaneously.

??????????????

7 posted on 07/13/2002 3:35:26 PM PDT by Dawgsquat
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To: facedown
Also...............

Bulk tobacco-rollyourown-stuffyourown
http://www.cigarettetobacco.com/index.htm
http://www.ryotobacco.com/index.php3
http://www.webservr.com/rollyourown/
http://www.seedman.com/access.html

Discount commercial cigs
http://www.discountcigarettes.net/004-g100.htm
http://www.thetobaccoshop.com/page19.htm
8 posted on 07/13/2002 3:36:09 PM PDT by Mr Fowl
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To: JeanS
state and federal authorities lose more than $1.5 billion annually in evaded cigarette taxes.

Add to that the cost of investigating smuggling and evasion, plus the prosecution costs - it may be a net loss.

---

Flyer

9 posted on 07/13/2002 3:38:43 PM PDT by Flyer
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To: Dawgsquat
I caught that too; it's either one, or the other, babe. If they pay the taxes, revenue increases. If they quit, they don't pay the taxes, and the revenue takes a dump.
10 posted on 07/13/2002 3:38:51 PM PDT by Bandolier
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To: JeanS
Anti-smoking advocates call it a win-win situation, enabling states to reduce smoking and budget deficits simultaneously.

This is why anti-smoking advocates are idiots. It's not a win-win situation, it's a zero-sum game. Except it's a zero-sum game with a loophole; you can buy over the web or just drive across the border into another state and pay far less. End result: The smoker doesn't stop, or even reduce, his smoking, and his home state goes from collecting a modest amount of tax to getting none at all.

11 posted on 07/13/2002 3:39:43 PM PDT by Timesink
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To: JeanS
Bumped and bookmarked!
12 posted on 07/13/2002 3:45:46 PM PDT by Drew68
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To: JeanS
Congressmen know that cigarettes are an easy target for two reasons. The first is that smokers have been made to feel guilty for years and would sit back and take it. Instead of calling it a 'sin' tax, it should be called a guilt tax. The second reason is that fewer people are smoking now which means that smokers are no longer a big voting bloc. These cowards need to be thrown out on their collective arses because they are a detriment to society. I quit giving to the republican party because of their herniated spines.
13 posted on 07/13/2002 3:46:23 PM PDT by Jaidyn
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To: *puff_list
.
14 posted on 07/13/2002 3:51:19 PM PDT by Libertarianize the GOP
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To: JeanS
In Congress, Rep. Martin Meehan, D-Mass., is leading an effort to tighten regulation of Internet cigarette sales. Meehan's chief of staff, Bill McCann, predicted bipartisan legislation would be drafted this year aimed at enforcing existing requirements that Internet merchants block sales to minors and report out-of-state buyers.

I've got no problem with the cracking down on sales to minors. But I was under the impression there is not to be collection of state taxes on internet sales.

And before anyone says there is a diference between sales tax and excise tax - I will state there isn't. If you don't buy the product, you don't pay the excise tax, therefore it is an additional sales tax on specific products.

If they get away with collecing the excise tax, what is going to stop them from collecting the sales tax on any other product????

15 posted on 07/13/2002 4:00:54 PM PDT by Gabz
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To: Jaidyn
I quit giving to the republican party because of their herniated spines.

Me too!

I throw away - without opening - at least two Republican begging letters a week. And I get about one phone call a month, to which I say "Not interested".

16 posted on 07/13/2002 4:03:15 PM PDT by jackbill
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To: JeanS
In many legislatures, even tax-averse conservatives have supported the increases.

Good for them. Except for the smoking Jihad here, a lot of conservatives regard smoking as an ugly, dirty, sinking, disgusting habit and efforts to reduce it deserve praise rather than ridicule. Many, many conservatives both in the legislature and in the general population vote to regulate or tax the vile stuff.

17 posted on 07/13/2002 4:05:47 PM PDT by Drango
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To: TomGuy
"After they have drained the tobacco/smokers, they will go after other sources..."

Bet you a nickle that once the mechanism is in place for identity and enforcement actions, the very next commodity concentrated on will be ammunition and reloading supplies. It will be done quietly and without much if any coverage in the press.

I have long thought that the rapidly increasing burden put on smokers might be the proverbial last straw, and bureaucrats might have to start looking over their shoulders for the smoking gun. (pun intended)

18 posted on 07/13/2002 4:09:06 PM PDT by wcbtinman
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Comment #19 Removed by Moderator

To: Bandolier
I caught that too; it's either one, or the other, babe. If they pay the taxes, revenue increases. If they quit, they don't pay the taxes, and the revenue takes a dump.

Exactly.
Furthermore if they pay the taxes, revenue increases, but those revenues don't materialize out of nothing...they are revenues sucked out of other sectors of the economy.

20 posted on 07/13/2002 4:15:45 PM PDT by Jorge
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