Opinion Editorial | |
| Wednesday, May 13, 1998 | |
Tobacco Bill Could Defeat its Goal |
One of the biggest problems with the Senate Commerce Committee's proposed
tobacco legislation, which would raise cigarette prices by at least $1.10
per pack, is that it inevitably will cause a sharp increase in cigarette
smuggling. This not only will reduce the revenue that the legislation is
expected to raise, but may even make it easier for children to obtain cigarettes. Among those who have expressed concern about the tobacco deal's impact
on smuggling are the attorneys general of Colorado, Ohio, Utah and Washington
state. In an April 24 letter to Senator Orrin Hatch (R-Utah), they point
out that interstate cigarette smuggling is already a $1 billion per year
problem, with contraband cigarettes holding as much as 23 percent of the
market in California. New York State alone loses $300 million per year
in revenue due to smuggling. The problem will be worsened by any large
increase in federal cigarette taxes. "There is a definite correlation
between tax rates and the level of smuggling," the attorneys general
confirm. Similar warnings have been expressed by major police organizations.
For example, the Fraternal Order of Police has said, "We are extremely
apprehensive that passage of this [tobacco] legislation will precipitate
the emergence of a thriving black market in cigarettes, posing huge problems
for law enforcement at every level." The problem of smuggling has been growing as many states have jacked
up their cigarette tax rates. The latest case is Alaska, which recently
raised its tax from 29 cents to $1 per pack and saw cigarette sales at legitimate
outlets virtually collapse, despite no evidence of reduced smoking. At
Carrs supermarkets, a local chain, cigarette sales fell 60 percent after
the new tax took effect. As a result, the state has been forced to revise
down its estimate of revenue from the new tax this year by one-fourth. Of course, some of the fall-off in sales came from stockpiling by smokers
in advance of the tax increase. According to the Anchorage Daily News,
in the three months before the higher tax took effect, Alaskans bought nine
million more packs than during the same period a year earlier -- $20 million
worth. However, there is also evidence of smuggling, mainly through mail
order sales from indian reservations in the lower 48 states, where state
sales taxes are not collected. The saving can be as much as $7 per carton. At a recent hearing, Senator Hatch asked Lawrence Summers, Deputy Secretary
of the Treasury, if he was concerned about the possibility of increased
smuggling if the tobacco legislation passes. Summers replied that there
was a leakproof system in place to prevent that possibility. Hatch reports
that a law enforcement official with whom he spoke afterwards termed Summers'
contention "laughable." Hatch went on to say this: "Law enforcement officials are extremely apprehensive that passage
of this legislation will precipitate the emergence of a thriving black market
in cigarettes....They say the Commerce bill, in particular, will inevitably
lead to the creation of a massive black market, giving organized crime a
new line of business and undermining not only respect for the rule of law,
but also the real goal of the legislation, preventing underage tobacco use." This last point is the one that concerns Hatch the most. "One of
the most frightening outcomes of a new black market," he said, "would
be the likelihood that children will find it easier than ever to purchase
tobacco products." Hatch said it is not too hard to envision contraband
cigarettes sold on "literally every street corner." This will
make it even harder than it is now for parents to keep cigarettes out of
their children's hands, he believes. Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis),
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