`Grass Tax' Aims for Dealers' Wallets

IN some states, it is the ``grass tax,'' in others the ``Al Capone tax.'' But by whatever name, an increasing number of states have passed laws requiring dealers to pay a stamp tax on the illegal drugs they sell - and allowing police to seize houses, cars, boats and other assets if they don't. At present, law enforcement officers can seize and seek forfeiture of vehicles and property actually used in drug-dealing activity. But the stamp act goes further, extending the reach of the law to attach other dealer assets not used in criminal activities.

Nonpayment of the stamp tax in some states, for example, is a civil law opening up arrested drug dealers (who have, so far, been rather uninterested in paying) to income tax evasion charges and heavy fines and forfeitures. (Al Capone himself did not go to jail for murder or bootlegging, but for tax evasion.) Some states, however, make evasion of the stamp tax a criminal offense which can lead to longer jail sentences.

At present, 13 states have a drug-tax law, another four are looking into it. Tax officials in fiscally strapped Massachusetts are also drafting drug-tax legislation to be presented to Gov. Michael Dukakis early next month.

Under the Massachusetts law, dealers would be required to purchase special color-coded stamps from the state's Department of Revenue - then affix them to bags of heroin, cocaine, and other illegal drugs. If a dealer is caught with unstamped drugs, he or she is slapped with hefty tax penalities as well as criminal charges.

The Massachusetts plan would make the cost of the stamp equal to the street value of the drug, says Betsy Houghteling, Revenue Department spokesperson. Drugs worth $3,000 would have a tax of $3,000. Then dealers would pay a 100 percent penalty for not buying the stamp. Other states go by weight: $350 for a gram of marijuana; $200 per gram of cocaine; $400 per 10 units of drugs not sold by grams, such as LSD.

Of course, nobody really expects dealers to actually buy these stamps. And they do not. Since 1986, only 294 stamps worth $2,000 have been purchased in Minnesota, and most of those were by collectors. But the tax has provided a potential windfall for the state, which has collected $780,000 following drug arrests. The state is also trying to collect another $26 million from dealers found to be liable.

A Utah man, who was sentenced in March to one to 15 years for operating a ``speed'' lab out of his garage, was hit with $6,250 in fines. The state attorney general's office has started forfeiture proceedings against his home, its furnishings and vehicles, according to a United Press International report. But the big penalty came from the state tax commission, which filed a $217.6 million claim against him for failure to purchase drug stamps.

Assessing is one thing, actually collecting is another. Since 1987, Kansas has assessed nearly $2 million, but collected only $7,860.40. ``We didn't think we'd see even that much,'' says Cleo Murphy, bureau chief for the Kansas Business Tax Bureau. ``I can see us collecting 5 percent of [the $2 million].'' Half of current assessments are being appealed, Ms. Murphy says.

Some legal experts also complain that the law goes too far in the effort to make drug dealers pay for their crimes. ``The stamp tax is designed as a circuitous method of entrapment,'' says Colleen O'Connor, national public education director for the American Civil Liberties Union.

``The government is frustrated with its inability to stop the flow of drugs and has sought quick fix instead of enforcing the laws on the books,'' Ms. O'Connor says. ``But creating a new violation of criminal law and finding ways of imprisonment is cynical and constitutionally questionable.''

South Dakota used to have a drug-tax-stamp law, but the state's Supreme Court shot it down as a violation of constitutional protection against self-incrimination. The Minnesota Supreme Court, however, ruled in 1986 that the statute did not force a dealer to incriminate himself.

``The statute has a couple of provisions in it that enabled it to withstand being declared unconstitutional,'' says Steven Alpert, an assistant district attorney in Minnesota. ``Dealers can pay the tax and get the stamp without being required to give their name, address, social security number or other identifying information.''

Massachusetts is already doing income tax assessments on drug dealers, prostitutes, and bookies. Last year the state assessed $2.1 million in back taxes and collected $600,000, according to Ms. Houghteling. Now they are working on assessing the state's 5 percent sales tax on drug dealers. ``We're good at shaking the money tree,'' she says.

Law enforcement officials see it as another tool in the war against drugs. ``We're sending a very strong message to those in this business that they're going to pay heavily in all respects,'' says Hubert Humphrey III, Minnesota's attorney general. That state also adds a criminal penalty on top of the tax penalty: up to 5 years in jail and $10,000 fine or both.

``It's a $115 billion industry in this country, $500 million in Minnesota,'' estimates Mr. Humphrey. ``Philosophically, you could ask yourself, should the state be doing this. But this problem is not one for philosophy. We've got to take every single action we can take to put a squeeze on.''