Tax: Cigarettes Were Easy, What’s next?

Mr. Jenkins,

Regarding “Cigarettes Were Easy; What’s Next?”? Bravo! I believe that your comments excerpted below are most appropriate and on point:

(Click on Read More)

“Always on the lookout for somebody to fleece, the Anchorage Assembly unanimously decided Tuesday night to stick it to smokers for the good of the community. At Mayor Mark Begich’s request, Assembly members decided tobacco users need to carry more than their fair share in this city by paying $1 more for a pack of cigarettes, or $10 more a carton, starting Oct. 1 . . . The promise, yet unfulfilled, is that the Assembly will offset property taxes with any and all revenue from the increased tobacco tax. That means those of us who do not smoke will milk tax benefits of about $9 million from those who do . . .Probably more important than any tax ramifications are the long-term implications of government singling out one group of citizens and additionally taxing them to reduce the levy on another. More frightening is their fellow citizens silently allowing it to happen. Well, they must be saying to themselves, at least it’s not me. But it could be. As wildebeests must ask themselves while thundering across the African veldt under the unblinking gaze of hungry predators: Who’s next?”

How about addressing smoking bans and tribal exemptions next?

Here in Washington tobacco control activists tried to foist a smoking ban for bars, taverns, casinos, restaurants, and other hospitality establishments. Initiative 890 failed secure 4 percent of registered voters’ signatures to qualify for the November ballot. A similar smoking ban in Pierce County has been overturned by both our superior and appeals courts. That ban in now before the Washington Supreme Court, to have oral arguments November 16, 2004.

The interesting thing about that is tribal casinos and related bars, taverns, plus restaurants are exempt from smoking bans. Such establishments are also exempt from property taxes. Patrons who choose to smoke as an integral part of their hospitality experience therefore take their business and revenues from taxpaying nontribal establishments to tax exempt tribal venues. Consequently, smoking bans cause a predictable migration of the hospitality business revenue tax base to tax-exempt venues.

Having irresponsibly squandered legitimate city and county tax revenues by passing personal-preference bans such dilettantes then seek to make up the spread through new taxes on smokers to make up revenue shortfalls.

We have heard from tobacco companies, states, and tobacco control advocacy groups like the Robert Wood Johnson Foundation we find that they all sing in chorus with one voice. Philip Morris and the RWJ foundation agree that more smoking bans should be passed and that the U.S. Food and Drug administration must regulate tobacco. States and tobacco control advocates agree that persons who smoke are the expedient revenue source for whatever ails revenues, plus the duty “Target Group” on whose backs one can climb the ladder to political “success.” Perhaps it is now time for tobacco consumers and small business owners – those ignored to date as if their legitimate interests are not worthy of consideration — to have their say in the matter, too.

It is transparently clear that the Anchorage cigarette tax is crafted to take money from one state-defined citizen “Target Group” (persons who smoke) for the express purpose of benefiting other classes of citizens (nonsmokers who do not pay such taxes for property tax relief and property owners). Considering that persons who smoke are statistically in lower income groups the economic discrimination imposed by that scheme is particularly reprehensible: it predictably penalizes lower income citizen groups least able to pay and will with certainty benefit the highest income large property owners to the greatest extent. Who will benefit more from the new Anchorage cigarette tax, a lower income smoker who rents or a well-heeled policy advocate living off a six figure Robert Wood Johnson Foundation grant living in a $300,000 house?

Fortunately, situations like those in Anchorage and Washington now provide the basis for tobacco consumers to present their own voice through the courts. All citizens – including hospitality small business owners and persons who smoke – are constitutionally entitled to equal protection of the laws and to the protections afforded by prohibition of special privileges and immunities. Perhaps recovering every dime looted from persons who smoke through civil rights judgments, then trebling that amount under RICO statutes will get the attention of the vacuous-minded who believe that it is OK to permit elected representatives to loot their neighbors so nonsmokers can continue on their tax free-ride.

Please keep expressing your views. We appreciate it. By doing so you have accomplished at least one worthwhile public service: when citizens who comfortably enjoy a property tax free-ride at their neighbors expense find that they, too, must pay to satisfy civil rights and RICO judgments at least they cannot say they were not warned.

Best Always,
Norman E. Kjono
Columnist, Forces.org

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SMOKERS MAY BEGIN A . . . ‘Life of crime’

MAYOR MARK BEGICH and the Anchorage Assembly have decided to take their chances and hope that the dollar-a-pack increase in the city’s cigarette tax won’t bring a wave of crime here.

They have the support of Anchorage Police Chief Walt Monegan, who doesn’t think a crime wave and enforcement problem are likely, but the facts seem worthy of concern. The Alaska Department of Revenue looks at the risk somewhat differently and doesn’t want the volume of illegal activity to get any larger than it is already.

Tobacco is the state’s second-largest stream of cash, after oil, and encouraging black marketing could endanger that stream. Last fiscal year, cigarettes brought $48 million into the state treasury.

Forty-two million packs of legal cigarettes are sold in Alaska each year. That equals 4.2 million cartons or about 88 40-foot container loads per year, one every four days. The federal, state and local taxes on one container load are about $1.6 million on cigarettes worth abut $580,000 before taxes. Skilled smugglers could make more than $1 million per container.

The volume of black-market smokes here is unknown and may not be large enough to attract organized crime, though that has been the experience in urban areas of the Lower 48. Organized crime and even terrorist groups, including al-Qaida, are getting into cigarette smuggling because demand is high and penalties are much lower than in the drug trade.

Possession of more than 5,000 unstamped cigarettes – 250 packs or 25 cartons – is a Class C felony and carries a possible $5,000 fine. Many smugglers are successful in plea-bargaining the felony charges to misdemeanors and getting little or no jail time, much different treatment than is likely for a drug bust. Having less than 5,000 illegal cigarettes in possession is a misdemeanor with a fine of up to $1,000.

If large-scale smuggling doesn’t occur, the more likely “crime wave” is a gray market in which Anchorage smokers will drive to the Valley or the Kenai Peninsula to buy their smokes. After all, the saving would be more than $12 a carton; a trunkload of cigarettes – if properly stored to preserve freshness – would save a bundle and could last a tobacco addict for months.

Assembly Chairman Dick Traini said he suspects Mat-Su will soon impose a similar tax, which would reduce the attraction of buying cigarettes there. And – who knows – the Kenai Peninsula Borough might do the same.

Traini said Begich’s estimate that the tax boost will raise $8.9 million incorporates a “leakage” factor of up to 35 percent. That means the estimate will hold even if 35 percent of all cigarettes smoked in Anchorage are bought elsewhere.

We’ll believe all this works out when we see it. In the meantime, let’s hope our tobacco-addicted neighbors don’t start a life of crime.

The Voice of the Times does not represent the editorial views of the Anchorage Daily News. This commentary is published under an agreement with the owner of the former Anchorage Times newspaper to preserve its separate editorial voice. The Voice of the Times staff can be contacted at anchtimes@alaska.net.