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."

[SheLion]

Kentucky Information

Read more Kentucky News from Google News.

Forces Kentucky. New web site with a forum!

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

To reach any and all Kentucky senators and reps there is a toll free number: 1-800-372-7181. You can leave messages of support for bills or whatever for as many as you want.

Terry Gray
2004 candidate for House of Representatives.

Terry Gray, president of FORCES Kentucky, video online debating Smoking Bans.

Read Terry Gray at The Jefferson Review.

 

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Tobacco Taxes Kentucky's excise tax per pack of cigarettes: $0.030 Kentucky's excise tax collection for the fiscal year ending June 2002: $17,145,000 Sales tax on tobacco products: 6.00% 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 Kentucky to produce the same state excise tax revenue generated by one carton of cigarettes: 6.7

click for larger view

Number of bottles of wine that must be sold in Kentucky to produce the same state excise tax revenue generated by one carton of cigarettes: 3

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Kentucky Smokers' Contributions
to the State Economy - 2003

Kentucky smokers comprise only 32.6%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	$	21,436,000
Smokers Pay Sales Taxes2	$	114,324,000
Smokers Pay Tobacco Settlement Payments3	$	258,879,000
	$	394,639,000

Smokers' Economic/Tax Profile 2002

• Income¹

Kentucky smokers' median income	$	28,000
Kentucky nonsmokers' median income	$	$39,752

• Working families pay more¹
  • 46% of Kentucky smokers had household incomes LESS THAN $25,000
  • 7% of Kentucky smokers had household incomes 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 Kentucky smoker in excise and sales taxes	$	137
Cost per Kentucky smoker for settlement payments to Kentucky	$	260
Total annual payments to Kentucky per smoker	$	397
Total annual payments to Kentucky per nonsmoker	$	0

Kentucky Smoker Facts⁵

• Total FY2003 smokers' payments to Kentucky were:
  • More than five times as large as state excise taxes on alcoholic beverages in 2003 ($75.7 million).
  • Almost three times as large as FY2003 coal severance tax revenues ($141.7 million).
  • Larger than FY2003 corporate income taxes ($278.1 million).
  • Larger than FY2003 motor vehicles usage tax revenues ($389 million).
  • More than twice as large as FY2003 Kentucky lottery revenues ($171 million).
• The total amount paid by smokers in Kentucky would have covered FY2003 expenditures for:
  • Parks ($76.4 million) -AND- Pupil Transportation ($202.2 million) -AND- Workplace Standards ($96.3 million)
    -OR-
  • Environmental Protection ($57.3 million) -AND- Public Health ($235.2 million) -AND- Children with Special Health Care Needs ($54.3 million)
    -OR-
  • Mental Health/Mental Retardation ($378.7 million)
    -OR-
  • The Kentucky Community and Technical College System ($383.6 million)

TOTAL SMOKER CIGARETTE PAYMENTS TO KENTUCKY

Per year:	$	394,639,000
Per day:	$	1,080,463
Per hour:	$	45,019
Per minute:	$	750
Per second:	$	13

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

 

¹Centers for Disease Control's Behavioral Risk Factor Surveillance System, 2002
²Orzechowski & Walker, Arlington, Virginia; from state revenue department.
³PriceWaterhouseCooper
⁴U.S. Census Bureau, 2000 state population and Centers for Disease Control's Behavioral Risk Surveillance System, 2002
⁵Tax comparisons are from Kentucky Office of the State Budget Director, Fourth Quarter, 2003 Quarterly Economic and Revenue Report, online at http://www.osbd.state.ky.us/publications/4thQTR-FY03.pdf. Budget comparisons are from the Kentucky Office of the State Budget Director, 2004-2006 Budget of the Commonwealth: Historical Data, online at http://www.osbd.state.ky.us/publications.htm.

Click here to read the rest

[SheLion]

Thanks for the ping!!!

[Smokin' Joe]

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.

Maybe where you live, but definitely not here. You cannot 'offshore' farm or oilfield labor. It has to be here in the first place.

So that excuse to keep taxing more instead of spending less just won't wash.

[Smokin' Joe]

Instead, states should equalize their tobacco taxes –

NO, NO, and NO!

This amounts to price fixing. Why should North Dakotans have to pay the same tax as New Yorkers? Screw that!

Rein in your legislatures!

[SheLion]

North Dakota Information

 

Tobacco Taxes North Dakota's excise tax per pack of cigarettes: $0.440 North Dakota's excise tax collection for the fiscal year ending June 2002: $19,118,000 Sales tax on tobacco products: 5.00% 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 North Dakota to produce the same state excise tax revenue generated by one carton of cigarettes: 48.9

click for larger view

Number of bottles of wine that must be sold in North Dakota to produce the same state excise tax revenue generated by one carton of cigarettes: 44.4

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North Dakota Smokers' Contributions
to the State Economy - 2002

 

North Dakota smokers comprise only 22.1%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	$	19,117,534
Smokers Pay Sales Taxes2	$	8,689,789
Smokers Pay Tobacco Settlement Payments3	$	23,162,587
	$	50,969,910

Smokers' Economic/Tax Profile

• Income¹

North Dakota smokers' median household income 2001	$	30,550
North Dakota nonsmokers' median household income 2001	$	38,199

• Working Families Pay More¹

41.3% of ND smokers had household income LESS than $25,000

6.8% of ND 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 Liability⁴

Total average paid per North Dakota smoker in excise and sales taxes	$	261
Cost per North Dakota smoker for settlement payments to North Dakota	$	246
Total annual payment to North Dakota per smoker	$	507
Total annual payment to North Dakota per nonsmoker	$	0

 

North Dakota Smoker Facts ⁵

• Total smokers' payments to North Dakota were:
  • Eleven times as large as excise taxes on alcoholic beverages in FY2001 ($4.9 million).
  • More than ten times as large as death and gift tax revenues ($5.1 million) in FY2001.
  • Nearly as large (85%) as FY2001 corporate income taxes ($63.4 million).
• The total amount paid by smokers in North Dakota could cover the 2001-2003 biennium general fund appropriations for:
  • Bismark State, AND Lake Region State AND Williston State Colleges AND the North Dakota State College of Science ($53.6 million) COMBINED
    OR
  • The University of North Dakota Medical Center ($30 million) AND the North Dakota Department of Health ($14.8 million) COMBINED
• In 1997, smokers provided 1,639 jobs that paid an additional $1.2 million to the state in personal and corporate income taxes.⁶

TOTAL SMOKER CIGARETTE PAYMENTS TO NORTH DAKOTA

Per year:	$	50,969,910
Per day:	$	139,548
Per hour:	$	5,815
Per minute:	$	97
Per second:	$	2

CIGARETTES DON'T PAY TAXES -
NORTH DAKOTA SMOKERS DO!!

click here to read the rest

[Smokin' Joe]

WOW! Thank you for the information and the informative link!

We know we are already getting screwed. I pay more for car insurance than a non-smoking drinker who has had no DUIs and I don't drink. There is no way any of this is equitable.

That said, there is no way charging say...2.40 a pack state tax (like NJ) is going to make it any more fair, and if the taxes were equalized, you can bet your last butt in the pack that they would all normalize around the current maximum. (What legislature could resist the windfall?--the antis would be screaming for it in the streets!)

[SheLion]

That said, there is no way charging say...2.40 a pack state tax (like NJ) is going to make it any more fair, and if the taxes were equalized, you can bet your last butt in the pack that they would all normalize around the current maximum. (What legislature could resist the windfall?--the antis would be screaming for it in the streets!)

I'm glad you can use the link!!  Bookmark it. :)

Well, our glutton lawmakers need to hear from us.  We are sick and tired of being blamed for everything because we smoke and we are sick and tired of carrying the state budgets on our backs.  It has to end.

Black market?  Terrorists?  Well, if each state would treat their constituents fair that smoke a legal product, none of this would have happened.  The lawmakers screwed us, and we turned around and screwed them, and they can't take the blame to save their lives.

The government created this cigarette black market and if the terrorist are in on the deal, the lawmakers have no one to blame but themselves.

Last I looked, cigarettes are still a legal product and it's the American Way to Shop Cheap.

[Gabz]

The government created this cigarette black market and if the terrorist are in on the deal, the lawmakers have no one to blame but themselves.

AMEN.

[SheLion]

That's exactly how I feel. But the lawmakers will never take the blame. They can do no wrong, you know.

[TheForceOfOne]

Why isn't unlawful for state and federal agencies to over tax legal products based purely on social preference. This is a bad precedence, it allows authority to dictate which legal products we chose. Alcohol, fatty foods, what car you buy, this is tyranny and it goes against freedom of choice in a free society. The way cigarettes are taxed you would believe it was a valuable commodity like a nice home, but quite the contrary, they believe it has no value.

[Gabz]

They need to be continually told they, not smokers are to blame. It needs to be repeatedly oudly and often.

[Gabz]

but quite the contrary, they believe it has no value.

Au contraire.......it is of great value to our esteemed lawmakers........you see, tobacco users are only 25% of the population, a minority, thus an easy target for ridicule and outrageous taxes. The majority are all in favor of taxing someone else, so come re-election time they can happily proclaim they didn't raise taxes and the majority will believe how fiscally responsible they are, forgetting that a small minority was taxed to balance the budget.

[TheForceOfOne]

No no your right, I didn't mean it that way. What you point out is the way they do it. Condemn it and tax it to death. If it was so bad for us why wouldn't they outlaw it, the money, the money, the money, and so it shows they don't really give a damn about the affects it has on your health but they do care about your wallet! lol

[Gabz]

I understood what you meant - I was being sarcastic, as I had assumed you were.

[borntobeagle]

Thank you SheLion...Just sent this along to a buddy who has to go sign the tobacco buyout forms tomorrow morning.

He said 15 years ago he had 2800#., now it's 701#.

And of course, it's been cut down to $7.00 a lb. Not only is the Government crushing the smokers, but the tobacco farmers as well.

[SheLion]

And of course, it's been cut down to $7.00 a lb. Not only is the Government crushing the smokers, but the tobacco farmers as well.

Well, thank God for the Internet. They can't hide this stuff anymore. And they better know that!

More and more of us are on to them every day. We can see what it's all about. Money.

Good luck to your friend.

[kingattax]

nice paw print......makes it easier to track you :)

[SheLion]

nice paw print......makes it easier to track you :)

Heheh!

[EGPWS]

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.

That's a gimme!

However, for some reason, cutting taxes is NEVER, EVER on the list of recommendations to alleviate ill or undesirable circumstances.

[Land_of_Lincoln_John]

Kentucky surprises me. There's some tobacco growing there.