Efforts to halt cigarette smuggling could go up in smoke
For years, Interstate 95 was known as ''tobacco alley.'' It was a quick and efficient route for smuggling cigarettes from the low-tax states of the South to the populous, high-tax states of the Northeast.Skip to next paragraph
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Anyone with a truck could zip down I-95 over a weekend to the cigarette-manufacturing cities in Virginia, North Carolina, or Kentucky and load up with thousands of cartons. These could then be peddled in Philadelphia, in New York, or points north with counterfeit revenue stamps or perhaps no stamps at all.
This meant dodging state revenue agents en route, but the payoff after expenses could run as much as $1 a carton. New York State alone claimed to be losing about $70 million a year in revenue during the 1970s because of illegal cigarette sales.
Since 1979 cigarette smuggling has largely been held in check because of a tough new federal law, close cooperation between federal and state revenue agents, and the high price of gasoline.
But now state investigators are concerned that smuggling may resume in force and that they may not have sufficient resources to combat it. Reagan administration budgeters have cut heavily into the manpower of the federal Bureau of Alcohol, Tobacco, and Firearms (BATF) and are proposing that its regulatory responsibilities on cigarettes be transferred to the US Customs Service.
These state officials say that if that happens, they will be watching the size of the Customs budget appropriation for fiscal 1983 to know how much federal antismuggling help to expect. At the least, they are concerned that it may be many months, if not longer, before policing illegal cigarette traffic becomes fully integrated into the Customs Service schedule of duties.
This would offer would-be smugglers the opportunity they have been waiting for, suggests J. Robert Murphy, assistant director of investigations for the New Jersey Division of Taxation.
In the meantime, antismuggling work has become a low priority in Northeastern states with tight budgets. Thanks to the federal protection, many states have turned to tax audits as a means of catching suspected traffickers in contraband cigarettes.
But while audits can help catch wayward cigarette dealers, they are not effective against ''over the road'' smugglers. That takes fieldwork, and agents are often spread thinly - dealing with alcoholic beverage violations and illegal transportation of taxable motor fuels as well as contraband cigarettes. Pennsylvania has about 60 agents to cover 11.8 million people and 113,000 miles of public roads. New Jersey tries to cover 33,400 miles of roads and 7.3 million people with 22 agents.
That might not be a major problem if smugglers were still concentrating on I- 95. But they have become increasingly sophisticated - often calling their home base every 100 miles for instructions on which route to take next, investigators say.
The Northeastern states - with their wobbly economies - are among the heaviest taxers of cigarettes. Rhode Island raised its levy this year from 18 cents a pack to 23 cents. A smoker also pays a 23-cent tax in New York City and in New Jersey. By contrast, taxes in the key cigarette-producing states are all 3 cents a pack or less.
Says a source in the New York State Special Investigations Bureau: ''Certain people are hesitant to violate the law if the feds are involved. They don't worry about the states as much. But they know that Uncle Sam will be willing to spend $1,000 to get you for beating him out of $10.''
''I hope that BATF is not abolished,'' says Mr. Murphy. ''I have the fear that all the good we accomplished will go down the drain.''
So do Sens. James Abdnor (R) of South Dakota and Dennis DeConcini (D) of Arizona, members of the Senate Appropriations Committee. They have devised a plan that calls for BATF to keep all the regulatory duties it has now but would transfer 400 surplus agents to the Secret Service. Senator Abdnor is threatening defeat for any budget appropriation that includes the administration's plan.
Cigarette taxes by region and state (Cents per pack of 20) New England: avg. 17.5 Maine 16 N.H. 12 Vt. 12 Mass. 21 R.I. 23 Conn. 21 Mid-Atlantic: avg. 16.1 N.Y. 15 (plus 8 in New York city) N.J. 23 Pa. 18 Del. 14 Md. 13 W. Va. 17 D.C. 13 South: avg. 10.6 Va. 2.5 Ky. 3 N.C. 2 S.C. 7 Tenn. 13 Ga. 12 Ala. 16 Fla. 21 Miss. 11 La. 11 Ark. 17.75 Midwest: avg. 15.7 (exclud- ing Ohio) Ohio 5% of retail price Ind. 10.5 Ill. 12 (plus 10 in Chicago Mich. 21 Wis. 23 Minn. 18 Iowa 18 Mo. 9 Kan. 11 Neb. 18 S.D. 20 N.D. 12 Southwest: avg. 15.4 Okla. 18 Texas 18.5 N.M. Ariz. 13
Far West: avg. 11.9 (excluding Hawaii) Colo. 10 Utah 12 Wyo. 8 Mont. 12 Idaho 9.1 Nev 10 Wash. 20.8 Ore. 19 Calif. 10 Alaska 8 Hawaii 40% of wholesale price Source: Tax Foundation Inc.