Posted on 07/13/2002 6:14:09 PM PDT by SheLion
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 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.
I have done business with the indians before, the cigarettes were fresh, and were delivered fast. I was quite satisfied, but it was only a few dollars cheaper.
That has now changed, the cost benefits have shifted dramatically to the indians instead of heavily taxed state cigarettes.
My state will get NOTHING from me from now on !!!!
Canada tried the same thing a few years ago and lost hundreds of millions in taxes due to people swithching to the indians for their supplier.
Anyone that pays these new taxes is stupid enough to deserve to be unfairly taxed!
Just do a goolge search, there are indians that sell all brands, for at least $10 less than you are paying!!!
Why give $12 in taxes a carton to those state liberals, when you can give your money to free enterprize indians?
Shame on you for giving so much money to the liberals!!
(but you will be forgiven if you switch to the indians and save some big money!!!)
We are working on it, Sir Charles. Hang in there.
Way to go Larry!!! It is nice to see all the Libertarian indians helping us out!!!
http://www.yessmoke.com
http://www.yessmokes.com
One is Switzerland, the other Panama. Beware foreign "Marlboros" they are not the same -- all the US brands made overseas under license taste the same to me, crappy - they aren't using US tobacco, I don't think.
Another is http://www.smokes-spirits.com
Seems to me that $25 for a carton of ready mades of the real deal is about as cheap as is possible.
The american indians legally sell untaxed cigarettes. It is not illegal, it is not criminal, it is just plain old the american way!!
One could make a case that it is the state governemnts that are criminal by unfair taxation. Therefore, buying state taxed cigarettes makes one an accessory to crime.
That means that those that pay choose to pay the state tax, are the real criminals??
I wish everybody in the US smoked a pack a day?
Smart Man! You WON'T be sorry!
Max, you say: And the tobacco companies wonder why we don't support them? They are contemptible.
I don't disagree with you - but I think it is rather unfair to tar them all with the same brush. And the comment about retailers from PM is legitimate. Unless PM goes the way of B&W and does mail order catalog sales of their product - their main customers are the retailers.
I also have noticed that it is only PM that is being attacked bcause of Ryan's comment on both this thread and the previous one on this article. Nothing is being commented upon about RJR's reaction, whiich is also legitimate.
I don't know what has been going on behind the scenes in other states, but I am very familiar with what has gone on in Delaware for the past 20 years regarding tobacco taxes. Except for the MSA (which I won't get into) the TC's have been the ONLY friend smokers have had when it came to increases in taxes. The smokers are their own worst enemy through their continued silence.
The cross border sales, smuggling, or whatever you want to call it is a legitimate argument against the outrageous increases in cig taxes. Whenever Maryland raises it's cig taxes, like they just did - sales skyrocket in Delaware. I won't even talk about what happened to sales here when new Jersey cranked theirs up to like triple ours.
Unreasonable cigarette tax increases are discriminatory, regressive and, encourage illegal activities and should be opposed for all these reasons. (and probably a few dozen others)
It's for the children. If it saves one life, its worth it.
http://www.greekembassy.org/press/newsflash/2002/May/nflash0531.html
NEWS FLASH ! Greece joins the West in anti-smoking measures Athens, 31/05/2002 (ANA)
Greece will follow the example set by the United States and many European countries in enacting a series of nine measures against smoking and for the protection of non-smokers, Health Minister Alekos Papadopoulos said on Thursday.
Announcing the measures at a press conference one day before the international day against smoking, he said that measures will carry penalties of up to three months imprisonment and steep cash fines.
The measures include the total ban on cigarette advertising, beginning from Jan. 1st, which includes a ban on commercials in movie theaters as well, while restaurants and coffee shops will have to create non-smoking sections.
The non-smoking section system will not apply to bars and nightclubs that are open only during the evening and late night hours and it will not apply to the traditional type of Greek coffeehouses.
The minister stressed that the new measures include provisions for the strict enforcement of the cigarette smoking ban in enclosed public areas where people have to stay for long periods of time, such as bus stations, railway stations, airports etc., although the establishment of smoking areas in those places is mandated.
He added that the smoking ban in hospitals, clinics and in all places providing healthcare services will be strictly enforced, as it will be in public transport systems, including taxis.
The education ministry, in cooperation with the health ministry, will undertake a campaign to inform students of the dangers of smoking, aiming to create smoke free schools, while the measures include a mandate banning smoking in school grounds, with the parallel establishment of smoking spaces for teachers who smoke.
Also, the measures include the initiation of a health ministry campaign aiming to alert smokers on the dangers of smoking and to make them more sensitive to those who do not smoke.
The minister stressed that for the success of the measures the ministry's efforts include the upgrading of outpatient clinics of hospitals that aid smokers to reject the habit, while the ministry, along with the National Radio and Television Council, will work toward stopping indirect tobacco advertising in every radio and television broadcast.
During the presentation of the measures, Papadopoulos said the enforcement of the measures in the public service sector will be the responsibility of the managers and supervisors of each service.
The minister underlined that the measures aim at protecting citizens whether they smoke or not, to alleviate the cost of smoking for the healthcare system of the country and to avert the creation of a new generation of smokers.
Athens News Agency
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