Tobacco Road

Smuggling smokes is not a victim less crime

To many smokers, the smuggling of cigarettes from low-tax to high-tax states is a victimless crime--a free-enterprise way to bring down prices. Lawmakers see it differently. This week a law goes into effect in Ohio that makes "buttlegging" of as little as $60 worth of smokes a felony punishable by a minimum six-month prison term for the first offense. Ohio thus joins eight other states in recognizing that cigarette smuggling is no mere misdemeanor but a crime that drains their treasuries of badly needed revenue.

A growing crime too. Cigarette bootlegging is now a big business in 23 high-tax states, mostly in the Northeast and Midwest. The U.S. Advisory Commission on Intergovernmental Relations puts the total loss of revenue at $400 million a year. A quarter of that loss occurs in New York: other hard-hit states include Texas ($45 million), Florida ($36 million) and Illinois ($25 million). Worse still, cigarette smuggling has become an important revenue producer for organized crime, ranking fourth behind gambling, prostitution and narcotics. Massachusetts Democrat Edward Kennedy, who conducted Senate buttlegging hearings last month, says that the Mob's infiltration has led to "increasing violent crime: extortion and bribery, truck hijackings, armed robberies, serious assaults and even murder" of one smuggler by another.

None of the stiffer penalties at the state level are expected to do much good. Buttlegging has a lot going for it: a touch of high adventure, the allure of beating taxes, and profit. Nor are Mob connections needed to make a go of it. An individual entrepreneur with a van can load up in North Carolina or Virginia, where the state tax is only 2-c- or 2 1/2-c- a pack, head north on Interstate 95 (now known as Tobacco Road) and sell the cigarettes at a high profit hi New York and Connecticut, where state and local taxes are much higher (23-c- a pack in New York City plus the nationwide 8-c- federal tax).

Making only a couple of round trips a month, the efficient buttlegger can net as much as $24,000.

And without much risk. Prosecutors will usually allow arrested smugglers to plead guilty to misdemeanors, even in states that make buttlegging a felony.

Most prosecutors and judges simply cannot become overly excited about contraband cigarettes. In New York State, no smugglers have ever been fined more than $400, and hardly any go to jail even for a day.

What can be done? A simple solution would be to coax North Carolina and Virginia, the two biggest cigarette producers, into raising their per-pack taxes, thus eliminating the potential for profit. But that is not likely to happen; officials in those states think the problem is not that their taxes are too low but that taxes in Northern states are absurdly high. Says North Carolina Attorney General Rufus Edmisten: "I cannot justify spending countless hours looking for cigarette bootleggers who are not in violation of any of North Carolina's statutes." He is quite correct that they are not; buttleggers gladly pay the state's low tax. Legal distributors in high-tax states are trying to convince legislators that a cut in taxes would actually increase revenue--since there would be less smuggling and the tax would be collected on more packs--but so far, the lawmakers are not listening.

Pressured by frustrated lawmen, who cannot make arrests outside their states, and cigarette wholesalers, who say that the cut-rate weeds are driving them out of business, Congress is looking into the problem. A Senate bill heading for a floor vote next year would make buttlegging a federal crime, punishable by $10,000 fines and two-year jail terms. The law would be enforced by federal agents, whose authority crosses state lines. That might discourage the freelancers but would not make more than a dent in organized crime, which manages to profit in other businesses that violate federal law.

A bill introduced in the House last week concedes in effect that the problem is beyond law enforcement. It would remove any incentive to bootleg by substituting for varying state and local taxes a uniform federal tax of 310 per pack (revenues exceeding those produced by the current federal tax of 80 would be rebated to the states). That approach would be effective--but states' rights arguments are almost certain to kill it in Congress.

So it seems that unless the nation stops smoking en masse, millions of cigarettes will continue finding their way to users over Tobacco Road.

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