It's 2008, a time when controversy is front and center. I realize that for me to get involved in the cigarette controversy is dangerous because we live in such an opinionated age.
Is heavy smoking of cigarettes bad? Of course it is bad, we know that. Do cigarettes alone cause gangrene as a TV ad states? Of course it doesn't, but overkill is the rule of the day. Considering others have weighed in on the issue, I feel it is important to address the true factors at play.
I must say that I am convinced that high cigarette taxes are counterproductive. I am one of those people who believe you should never drive social policy with tax policy. It is bad government and in the case of cigarette taxes, it actually does more harm than good. A 2006 State Health Department report estimated that New York State loses up to $576 million a year in taxes from the sale of untaxed cigarettes alone. Raising cigarette taxes makes the butt smuggling situation worse. As cigarette prices increase, the opportunity for counterfeiters and smugglers to make a large profit becomes increasingly more lucrative and attractive. The increased tax invites criminals into our State and puts our citizens and business owners at risk. New York should implement an encrypted tax system to better address smuggling and to ensure the state collects its legitimate tax revenue.
The US House Committee on Homeland Security just completed an investigation at the request of Congressman Peter King of Long Island which discovered some staggering information. Cigarette smuggling is costing New York hundreds of millions of dollars in tax revenue. But even worse, terrorist organizations such as Hamas and Hezbollah are benefiting from untaxed cigarette smuggling as New York State loses revenue. Millions of profit dollars from illicit tobacco products are sent to overseas terror networks every year. The $50,000 plus profit from just one contraband load of cigarettes would be enough to fund as many as 10 USS Cole ship bombings. In just several weeks, according to Rep. King, a motivated butt smuggling terrorist cell could generate enough cash to fund another 9/11 - style attack.
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Criminal activity is not only occurring abroad. In the 18 months following the 2002 tobacco tax increase, the NYPD Cigarette Indiction Group (CIG) made 146 arrests, seized six cars, $250,000 in cash and 30,000 cartons (6 million) of cigarettes. This does not include the more than 1,000 arrests made by patrol units. New York City streets are familiar with the "$5 man," selling untaxed cigarettes, often unpackaged and sold to our youth who are unable to make a purchase in a legitimate shop. Domestic gangs arguably use money from this sort of criminal activity to fund their own operations. For every illicit product sold, the brick-and-mortar "mom and pop" shops around the corner are losing business.
We know legitimately sold cigarettes are bad for us, but counterfeits have been found to be even worse. Our youth and others who purchase these products are inhaling mold, dead insects, pesticides, heavy metals and even human feces, according to some reports and lab tests of seized products. These criminals are putting our citizens at even greater health risks.
Congressman King zeroes in on the main problem as being New York's refusal to collect taxes on the resale of untaxed cigarettes by Native American reservations - a policy called "forbearance" which has created an incredible opportunity for criminal enterprise. Changing the so-called "forbearance" policy would help avoid butt smuggling in some aspects, but there is another more effective solution.
I have introduced legislation in the Senate which will provide a new, counterfeit-resistant encrypted tax stamp. The implementation of this new, state-of- the-art technology is a powerful weapon in preventing butt smuggling. The legislation has been endorsed by the American Cancer Society, the American Heart Association, the American Lung Association, and the Campaign for Tobacco-Free Kids.
The bill, sponsored in the State Assembly by Dennis Grabrsyzak, will give New York's enforcement agents the tools they need to stop an illegal cigarette trade that expands and finances organized crime and terrorism around the world.
By creating this hurdle for counterfeiters, we can prevent illegitimate sales of below standard cigarettes and keep terrorist groups from attempting to usurp our revenues. A statewide program using encrypted stamps as part of a comprehensive system has proven successful in California. In the first 20 months of the program, California reported over $120 million in revenue.
The problems associated with smuggling will continue. The high-tech tax stamp system will protect our local businesses and domestic security by preventing counterfeit and illicit trade.
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