Crackdown on illegal cigarette sales eyed
With sales of illegal cigarettes in Massachusetts booming, a legislative commission recommended measures Friday to combat cigarette traffickers and capture hundreds of millions of dollars in lost tax revenue.
The recommendations from the state’s Illegal Tobacco Commission include increased fines and penalties for selling untaxed cigarettes, more money for enforcement, and creation of a task force to address cigarette trafficking.
Officials on the commission reviewed a series of studies and estimated that up to 28 percent of the cigarettes consumed in Massachusetts are bought and sold illegally in order to avoid the state’s tax, which increased last year from $2.51 to $3.51 a pack. The illegal cigarette trade costs the state hundreds of millions of dollars a year in lost revenue, and officials expect it to grow following last year’s increase.
“You see people saying why deal drugs when I can smuggle cigarettes,” said Amy Pitter, commissioner of the state Department of Revenue and chairwoman of the Illegal Tobacco Commission, which was created last year by the Legislature. “The profit is just as good. The chance of getting caught is smaller. Fines and penalties are not comparable.”
Enforcement agencies have found that most of the illegal cigarettes are brought into the state by organized traffickers, who buy inexpensive packs in states such as Pennsylvania that have lower cigarette taxes, sell them under the counter, and pocket the difference.
It is a profitable enterprise that state agencies have largely overlooked until now. The state attorney general’s office said in January that there had been no indictments in the last two years for cigarette tax evasion, even as trafficking schemes have grown in scale and sophistication.
Under Massachusetts law, it is illegal to bring even a single pack of cigarettes into the state without paying the state cigarette tax, which is the second highest in the nation after New York’s. Still, Pitter said any increased enforcement activity is not designed to target individual smokers.
“You don’t want to turn everyone who lives north of [Interstate] 495 and goes to New Hampshire to buy cigarettes into a criminal,” Pitter said.
Instead, the Illegal Tobacco Commission wants more law enforcement resources devoted to stopping organized traffickers, who in some cases have switched from selling illegal drugs to selling untaxed cigarettes. Cigarette tax evasion cases can take a year or more to build, and state agencies have not made those cases a priority.
“You may start with some corner store [selling untaxed cigarettes], and we’d like to shut that corner store down,” Pitter said. “But that will not stop the problem. You have to start following the money.”
State Representative Brian Mannal, one of two elected officials on the commission, expressed confidence that the Legislature will adopt the commission’s recommendations.
“We stand to not only cut down on the [untaxed cigarette] trade, but to increase revenue; I don’t know who can go against that,” said Mannal, a Barnstable Democrat. He anticipates that he and Senator Michael J. Rodrigues, the other elected official on the commission, will introduce legislation to allocate more money for enforcement and increase fines and penalties for dealing in untaxed cigarettes.
Public health specialists praised the commission’s recommendations. Dr. Michael Fiore, director of the University of Wisconsin Center for Tobacco Research and Intervention, said that tougher enforcement would make it harder to get cheap cigarettes and that research shows people smoke less when cigarettes cost more.
“The actions proposed by the commission are all public health winners,” he said. “If we allow the illegal sale of cigarettes at a lower price, what we in essence do is condone and encourage the use of cigarettes.”
If the Legislature adopts the commission’s recommendations, it will have to figure out how to pay for them.
The proposed task force would cost $2 million a year and increased enforcement would cost more on top of that, said Pitter, the revenue commissioner. State Representative Jeffrey Sanchez, House chairman of the Joint Committee on Public Health, expressed some doubt that the Legislature would find the money for the measures in what he described as “tough economic times.” He also said that because the untaxed cigarette trade is more than a state problem, Massachusetts taxpayers should not pay the entire bill for combating it.
“The tobacco industry should be responsible for securing its own supply chain,” said Sanchez. “Let’s have big tobacco step up to this, as well.”
Kevin O’Flaherty, northeastern regional director for the Campaign for Tobacco-Free Kids, expressed concern that more enforcement could come at the expense of programs for smoking prevention and cessation.
“To route this money to enforcement without spending adequate money on prevention and cessation, that would be a mistake,” he said. “[The Legislature] would rather do things that might increase revenue than do the things that would cost money but save a lot of money in the long run.”