So Funny: New York 'Crack Tax' Proposal Is Derided

New York 'Crack Tax' Proposal Is Derided
Many States Aid Enforcement With Levy on Illicit Drugs
By Keith B. Richburg
Washington Post Staff Writer
Sunday, February 17, 2008; A05

NEW YORK -- If you can't beat it, tax it.

That seems to be the axiom in New York these days,
where Gov. Eliot L. Spitzer (D), struggling to close a
$4.4 billion budget gap, has proposed making drug
dealers pay tax on their stashes of illegal drugs. The
new tax would apply to cocaine, heroin and marijuana,
and could be paid with pre-bought "tax stamps" affixed
to the bags of dope.

Some critics in the legislature are asking what the
governor has been smoking.

"I guess if it moves, he'll tax it," said Republican
state Sen. Martin J. Golden, who dubbed the proposal
"the crack tax." Some opponents said that because
cocaine and weed would be subject to the new levies,
it should more aptly be called "the crack-pot tax."

"How do I explain to my 16-year-old son that we're
giving a certain legitimacy to marijuana, cocaine and
heroin?" asked Golden, a former New York City police
officer who represents a Brooklyn district. "We are
taxing an illegal substance." He added, "Is
prostitution next?"

On the other side of the aisle, some Democrats, too,
were stunned by the plan. "My initial instinct is: I
don't understand it," said Bill Perkins, a state
senator from Harlem. "Most of the dealers I'm familiar
with are petty crack dealers -- most of them are
crackheads. They are broke, to say the least. I just
don't understand how you impose a tax" on broke
crackheads, he said.

Taxing illegal drugs is more widespread than is
generally known. At least 21 states have some form of
tax for illicit drugs, although some of those laws
have been challenged in courts, and others have fallen
into disuse. Almost all the remaining drug-tax laws
are used mainly by local law enforcement agencies as a
way to seize drug money and fund counter-narcotics
operations.

The controversial idea grew out of the efforts to
fight bootleggers such as Al Capone during Prohibition
-- going after the bootleggers for unpaid taxes often
required a lighter burden of proof than a criminal
prosecution. Taxing illicit drugs gained popularity
during the 1980s and early 1990s, when prosecutors and
law enforcement authorities were pushing for mandatory
sentences and other measures to signal a crackdown on
drugs and drug use.

"It was a way of getting tougher on criminals," said
Joseph D. Henchman, tax counsel for the Tax
Foundation, a Washington-based educational group. "It
kind of boggles my mind. If you want to get tougher on
drug dealers, increase the penalties."

"It's just weird to put an excise tax on an illegal
substance," Henchman said. "When you tax something,
it's a way for the government to say you can have it,
but we want a piece of it. . . . It's sending a mixed
signal."

Last September, a state appeals court ruled a drug law
in Tennessee unconstitutional, saying that an illegal
substance could not be taxed. In Massachusetts, that
state's supreme court in 1998 ruled a drug tax was an
unconstitutional form of "double jeopardy," so it is
not used, although it remains on the books, according
to the revenue department in Boston.

Allen St. Pierre, executive director of NORML, the
National Organization for the Reform of Marijuana
Laws, called the drug tax "a wacky idea. It's a
quintessential example of the absurdity of the war on
some drugs."

St. Pierre called it "bizarre, to say the least."
Taxing drug dealers, and especially users, he said,
"is like squeezing blood from a rock."

The Federation of Tax Administrators represents the
tax collectors for the 50 states and the District, and
Verenda Smith, the group's government affairs
associate, called the drug tax an effective law
enforcement tool. "The whole thing is about law
enforcement," Smith said.

Most states with the law sell stamps that drug dealers
can buy in advance, like what Spitzer is proposing.
Because no drug dealers are known to buy the stamps
and pay their tax in advance, the tax is usually
levied after they are caught.

Some states have designed distinctive drug stamps,
often depicting a marijuana leaf. Nebraska's drug
stamp depicts a rolled joint crossed with a syringe in
front of a skull and what appears to be a headstone,
with the label "R.I.P."

"People do walk in and buy the stamps. We assume they
are all stamp collectors," Smith said. "I believe only
one person out of 50,000 has ever been a drug dealer."
To avoid a court challenge, she said, the law has to
allow anyone to buy the stamps without showing
identification or alerting authorities that he or she
is a drug dealer.

In many Southern states, such as North Carolina, the
illicit substances tax is also applied to moonshine.

In New York, Spitzer proposed the drug tax in his
2008-09 budget as a way to deal with a projected
shortfall, and in a memo said taxing drug dealers
would raise $13 million in the coming fiscal year. The
governor's office said the bill would contain strict
secrecy requirements, so drug dealers who paid their
taxes would not be incriminating themselves.

A tax stamp for a gram of marijuana would cost $3.50,
and $200 for a gram of cocaine, "whether pure or
diluted," according to the governor's proposal.

When Robert Megna, the New York tax commissioner, went
to push the tax before a hearing at the state
assembly, he was grilled by assembly member Jeffrion
L. Aubry of Queens.

Aubry said he is concerned about figures compiled by a
Queens College sociology professor, showing that
between 1997 and 2006, about 360,000 New Yorkers were
arrested for marijuana possession -- usually small
amounts in a single joint, or nickel or dime bags --
and 85 percent of those arrested were black or
Hispanic. Most of those received probation.

But Aubrey, in an interview, said he is concerned that
adding a new tax would create more costs to the city
by forcing police to impose a new charge: tax evasion.

"Our prison population has been declining," Aubry
said. "This runs counter to that. . . . The poor, and
minorities, are the ones who end up arrested,
convicted and sentenced." Aubry vowed to fight what he
called a "boneheaded" proposal.

Megna replied, "It's not our intent to burden certain
portions of the population."

In the current anti-tax environment, politicians in
states such as New York are reluctant to raise taxes
more on average taxpayers, and prefer to cover budget
shortfalls through what experts call "sin taxes," on
products such as cigarettes and alcohol, or on
activities such as visiting strip clubs. Texas, for
example, recently introduced a levy on strip clubs
known as "the pole tax."

New York, for its part, already taxes lap dances at
strip clubs, but only if they are performed in the
club's V.I.P. room, not on the couches in the main
area of the club.

Strippers, like drug dealers, normally are not known
to complain about more taxes. "I guess they didn't
expect the drug dealers of New York to rise up and
join the anti-tax movement," Aubry said.