Feds fear cigarette tax may fuel acts of terrorism

The Argus ^ | March 11, 2005 | Steve Geissinger

[Land_of_Lincoln_John]

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 hike cigarette costs for litter cleanup or easing deficit pressures.

But federal terrorism investigators told The Argus on Thursday that such seemingly innocent legislation, further hiking 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 terroristgroups such as al-Qaida and Hezbollah.

Two new reports by a separate 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 cheered Republican Gov. Arnold Schwarzenegger's stance against tax hikes 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.

"This is not a defense of tobacco but rather an indictment of the inability of politicians to recognize the consequences of jacking up the cost of cigarettes with 'politically correct' taxes," Metcalf 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.

Federal agencies trying to halt cigarette smuggling view it differently.

"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.

"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 hike on cigarettes. It's being sponsored by Torlakson, who has supported tax hikes 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's also 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."

[Land_of_Lincoln_John]

Illinois is also considering steep cigarette tax hikes. As a non-smoker, I don't know much about this issue, but it's a fair guess that other states are considering the same tactic to increase revenue.

Oh, a tip of the hat to Daniel Pipes, who referred to this article on his essential blog.

Oh here is a pic, which according to Pipes, was created by Islamists to insult him! I wish I'd get insulted this way.

[need_a_screen_name]

Someone call Texas and clue Perry and the Texas Leg. in on this.

[Enterprise]

Stupid jackassed feds. First, they never should have put high taxes on cigarettes. Second, they never should have sued the tobacco companies. Stupid jackassed feds.

[johnmilken]

Drug prohibition fuels terrorism.

Get the products out of the hands of the gangs and into legitimate companies and let the quality be controlled, the businesses taxed and the consumers informed. Just as we do with alcohol and tobacco.

[E. Pluribus Unum]

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

Same logic applies to the War on Some Drugs.

[E. Pluribus Unum]

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

Same logic applies to the War on Some Drugs.

[SpaceBar]

Anytime you have a commodity whose price is set artificially high due to illegality, cartel, or unusually high tax, it becomes a natural locus of criminal activity. The more artificial the price, the greater this phenomenon. Cocaine, diamonds, petroleum, and now tobacco are some examples.

[kingattax]

PING

[Raycpa]

Sounds like they are setting the stage for a uniform state tax which will raise the law states via a federal excise.

[Coyoteman]

Cigarette taxes?

Can you say prohibition boys and girls?

I knew you could! (We all know where that went.)

Hiking cigarette taxes will have the same effect: i.e., none that's of any use. Tax revenues will level off at some point and will not go any higher no matter what rates the states or feds set.

Hint: see "Law of supply and demand."

[Raycpa]

Corrected: Sounds like they are setting the stage for a uniform federal tax which will raise the tax states in low tax states charge via a federal excise.

[billybudd]

Bah, this is miniscule compared to the drug trade. Check out this excellent article about how Syria makes billions off heroin production.

[borntobeagle]

Kentucky's tobacco is supposed to go up 30 cents this
June. I suppose I'll write a thank you letter to Gov.
"fly your plane over the White House" Fletcher.

"P.C." taxes, makes me ill!

[henderson field]

The states desperately need money because, at the same time that they continue to spend at an irresponsible level, revenues are down due to offshoring: they used to enjoy taxes from production line workers at $25 an hour; now they are getting taxes from fast-food workers at $7 an hour. Big difference.

[Vigilanteman]

Umm, how about identifying and deporting (or better yet, hanging) Islamofacists dealing in funneling finances to our enemies? That way, cigarette smuggling could be a venue reserved for honest American crooks.

[DumpsterDiver]

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.

They're probably all hiding out some where smoking cigarettes they purchased from some online source.

[SheLion]

I'm just a little sick and tired of cigarettes and President Bush being blamed for all the ill's on earth!

Dear Governor, 

As a smoker and tax-paying citizen of this state, I am joining a nationwide smokers strike to inform the Governors of the states that smokers will no longer accept excessive and punitive taxation.  Nor will we accept unnecessary restrictions and regulations any longer.
Until that day comes, I will not purchase another pack of cigarettes manufactured by Phillip Morris, R J Reynolds, Brown & Williamson or Liggett - including any of their sub brands – I will no longer support the Master Settlement Agreement.  Instead, I will buy brands made by non-MSA companies              

Smokers will willingly pay a fair rate of taxation: 

• Smokers request an end to smoking bans in adult only locations.  Businesses owners should choose to cater to smokers, nonsmokers, or both.
• Smokers will not accept the taxation of non-tobacco products like pipes, cigarette papers or any other smoking accessories. 
• Smokers will not accept a mail order ban.  Instead, states should equalize their tobacco taxes – this will end the now booming black-market as well as save the states millions of dollars in tobacco tax enforcement.  Then the only reason to mail order would be to purchase a product not available in their area - not to avoid excessive taxes. 
• Tobacco retailers should not be punished for selling a legal product by paying excessive and unreasonable licensing fees

   Every smoker, and everyone who knows a cigarette smoker will enlist their support to boycott the Master Settlement Agreement cigarette brands until taxes are fair and reasonable.

   

  I smoke and I vote!

   

  Name: ______________________

  Address: ____________________

  City: _________________

  Zip Code: _________

   

   

  21st Century Boston Tea Party: Holding the States' MSA Payments Hostage

  The "I Quit" Letter

   

   

  Copy or download the "I Quit" letter and
  send it to your Governor. 

   

  click here to download "I Quit" Letter

  click here to download Non-Smoker's I Quit Letter

  Click here to Contact Your Governor

  http://www.smokerstaxrevolt.com/id9.html

[SheLion]

Here is what Illinois smokers ALREADY pay with their cigarette tax dollars:Illinois Information

Illinois Smokers:
A public yahoo group for anyone who wants to talk about the Illinois ban situation.

Illinois Smokers Alliance:
A smokers ban discussion group from IL.  A public group but moderated against posts made by anti-smokers.

Illinois State Page:
Facts, Press Releases, Visiting, Government, and more.

IDPH Online:
Illinois Department of Public Health
535 West Jefferson Street
Springfield, Illinois 62761

 

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Tobacco Taxes Illinois's excise tax per pack of cigarettes: $0.980 Illinois's excise tax collection for the fiscal year ending June 2002: $471,551,000 Sales tax on tobacco products: 6.25% Local tax on tobacco products: $60,605,152 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.

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Comparing Excise Taxes on Cigarettes, Beer and Wine

click for larger view

Number of six-packs of beer that must be sold in Illinois to produce the same state excise tax revenue generated by one carton of cigarettes: 94.2

click for larger view

Number of bottles of wine that must be sold in Illinois to produce the same state excise tax revenue generated by one carton of cigarettes: 67.8

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Illinois Smokers' Contributions
to the State Economy - FY2003

 

In 2002, Illinois smokers comprised only 22.9%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	$	653,697,000
Smokers Pay Local Excise Taxes	$	160,325,000
Smokers Pay Sales Taxes2	$	58,000,000
Smokers Pay Tobacco Settlement Payments3	$	339,495,000
	$	1,211,517,000

Smokers' Economic/Tax Profile 2002

• Income¹

Illinois smokers' median household income	$	36,720
Illinois nonsmokers' median household income	$	45,942

• Working families pay more¹

34% of Illinois smokers had household income LESS THAN $25,000

16% of Illinois smokers had household income EQUAL TO or GREATER THAN $75,000

The impact of smoker payments on the incomes of working families was more than THREE TIMES the impact on higher income smokers. Those who can afford it least pay a disproportionate percentage of their hard-earned income in smoker payments.

• Smoker excise tax/sales tax/tobacco settlement payments liability in 2002⁴

Total average paid per Illinois smoker in excise and sales taxes	$	415
Cost per Illinois smoker for settlement payments to Illinois	$	161
Total annual payments to Illinois per smoker	$	576
Total annual payments to Illinois per nonsmoker	$	0

Click here to read all of it

[SheLion]

[Smokin' Joe]

"Cigarette traffickers can make as much as $60 per carton."

I don't know where they get their numbers, but they would have to give me better than $30 with each carton for me to sell one at that markup here (ND).

Most class A brands are selling around $30 now. I buy 'cheapies' for about 16 bucks a carton.