Strict laws must be put in place to combat New York City’s massive tobacco smuggling problem, former Bureau of Alcohol, Tobacco and Firearms and Explosives Assistant Director Rich Marianos told The Daily Caller News Foundation.
“Street gangs, narcotics crews, Russian and Asian organized crime networks, and terrorists are trading cigs for guns, narcotics — even humans,” Marianos, who was with the ATF for 27 years, said.
NYC’s disproportionately high cigarette tax is allowing hardened criminals and even terrorists to fund illicit activity and make huge profits, with almost no risk, thanks to lax tobacco smuggling laws.
Since 2006, the tax rate on NYC cigarettes has gone up 190 percent — consumers now pay $4.35 to New York and $1.50 to NYC per pack, which often cost more than $12. Consumers in nearby states, such as Virginia and Delaware on the other hand, pay closer to between $5 and $8 a pack.
“When there’s such a disparity, it increases criminal activity,” Marianos said. “I know that for a fact.”
Smugglers can sell a pack for $8 in New York — well below the market price — and still profit at $3 a pack, Marianos explained. The high profits, combined with the ease of smuggling and “ridiculous” tobacco smuggling laws that amount to what he calls a slap on the wrist, has led all sorts of criminals to use cigarettes as currency.
“The public needs to understand it’s not a mom and pop operation,” Marianos told The Daily Caller News Foundation. “These are some very very bad actors with ties to al-Qaida, Hamas, Asian organized crime, Russian organized crime.”
Last year authorities charged 16 people in connection with a cigarette smuggling ring they said bought $55 million worth of cigarettes in Virginia, and then sold them tax-free in New York. Three of those charged were linked to known terrorists, including members of Hamas, and more than $10 million of the group’s profits was unaccounted for.
“Let’s put in place tighter laws for criminal smugglers, more awareness by the politicians to put in more funding for law enforcement efforts — tougher state and federal laws,” Marianos said. He’s created a website, The New Tobacco Road, to bring awareness to the subject and give law enforcement and politicians tools and resources to get these criminals off the streets.
He declined to comment on another approach to addressing the smuggling problem — lowering the excise tax that causes the economic disparity and incentivizes smuggling — citing his expertise as law enforcement. “We seem to be pointing the finger at everyone but the criminal who is smuggling this stuff in,” he said.
Michael LaFaive, Director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, is an advocate for lowering the excise tax rate. “We could make America a police state and people would still smoke,” he told The Foundation. “People are not sheep lining up to be sheered. If policy makers realized that the world would be a happier place.”
New research shows New York’s adult smoking rate has increased for the third year in a row to 16.1 percent — the highest number in six years, reported The Wall Street Journal. And nearly 60 percent of cigarettes smoked in New York are smuggled into the state, according to a February Mackinac Center study.
LaFaive suggested cutting taxes in combination with stricter penalties for smuggling could thwart the illicit activity. “The problem is politicians became as addicted to tobacco revenues as smokers to nicotine,” he said.
Marianos noted the huge amount of lost revenue to black market tobacco — his website has a ticker currently showing more than $4 billion of lost revenue this year.
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