Tobacco Documents Online

HAVE WE T'HE' GUTS TO FIGHT ORGANIZED CRIME? ' By Morris Weintraub, Consultant New York State Speciai Taslc Force On Cigarette Bootlegging and the Cigarette Tax New York State is presently confronted with a decision that must be made in the next few weeks which can affect the moral and poli.tical climate in the whole state. The decision to~ reduce the cigarette tax can destroy the bootlegging of cigarettes in New York. If this bill is passed by the Legislature and signed by the Governor, it is predictedithalt there will be no loss' in revenue to the State or to the City of New York. However,it would take away approximately $7U-mill'ion from organized-crime. Are the State Legislature and the Governor .willi:ng to fight organized crime? Ever since the State cigarette tax was doubled in 1965, from 54 a pack to,1O14, cigarette bootlegging has been rampant in New York. Since then, one out of every four packs soldi in the State is bootlegged; and one out of every two packs in the City are illegal. The net results of 14 years of uninterrupted bootlegging has been a$'1=biillion total tax loss to New York City and New York State. In this same period of time,, organized crime's profits have been almost $'700-million. In the last 14 years all efforts at enforcement have failed to stop this illegal activity, evenithough penalties have been increased and enforcement units have been enlarged. Interstate organizations have beenformed', and evenwith the help of federal 03635112

agencies, very few people have gone to jail as the courts are very lenient towards this illegal activity. Added to all these problems, the cigarette distribution industry is being assaulted by organized crime. There~As no way that they can now compete for customers within the State of New York on the open market. Old-time legitimate wholesalers, .reta!ilers andivending, operators have either liqiuidated or sold their businesses because they are unable tolcope with the .probllem. Some legitimate.distributors have even been threatened!with physical harml. Added to all these problems has been the loss of approximately 250'0 jobs in the industry, .the closing d'own of many legitimate retail establishments, and the ever-i:ncreasing movement of racketeers to get into the wholesaling, vending and retail businesses to assure their distribution of illegal cigarettes. I believe that if'this trend is not curtailed', the underworld,, through the d'istribution. .of:_their illegal cigarettes, will control the distribution of other allied products, such as candy, cigars, sundries and evenn groceries through 100,000 outlets throughout the State. This will give th,em the outlets to sell other illegal merchandise suchlas pornogra!phy', drugs and'stolen property. All of the above have been documentedby the State Investigation CommissionReport of 1972'; The Report of the New York State Special Task Fbrce onlCigarette Bootlegging andd the Cigarette Tax,, cha.irediby Alfred Donati, Jr., Director of

-3- Special Investigation Bureau, State Department of:Taxation & Finance, May 1976; andialso The Advisory Commission of Intergovernmental Relations Report, "Cigarette Bootl'eggiing, a State & Federal Responsibility." The disparity iniprice between the low-tax states andi Wew y'o,rk is the crux of' the problem. Commission in 1972 said, The State Investigation. "The record is clear that cigarette bootlegging could be ended totally and instantly in the City andi State of New York by the el.imination, or at least sharp reduction, ofthepricedisp~arity which is caused solely by the substantial . differences in State excise taxes. Obviously, such a step raould end all profits for the boot- leggers andithereby end all boot legg;ing. " ~ In December 1976, the State Task Force recommended'thee elimination of the New York City cigarette tax and the reduct+ion from 15~~ to 14~'of the State tax plus licensing andicqntrQl in order to eliminate bootlegging as well as provide $7-million of revenue beyond the ervenues lost to the City and State. Such an action would take away $70i-mi]':lion fromm organized crime, maintain a legitimate cigarette distribution industry within the State of'New York, and eliminate the encroachment of the racketeers within the territory. Bills to accomplish the tax reduction and licensing with proper':safeguards to the City and State of New York have been introduced inithe State Legislature, but have not been passed' by both houses and signed~by the Governor.

t - 4'- The State must now answer the question of whether they are~willing,to take on organized!c'rime by making the legitimate industry competitive on~ the open market and defeat racketeers" efforts to take over the cigarette d'istribution within the. State of New York. The legitimate wholesale tobacco industry in New York has offered to put $15-million into an escrow account to cover any shortfall in tax revenues. This is firm evidence that the State will receive all revenues due it as a result of this bill. . Pennsylvania has found to their dismay that the corruptive cigarette bootlegging had to be protected against threats by the underworld. elements of monies made in illegal cigarette activities -have set a cloudlover cigarette tax adiministrative officials,the Attorney General of Pennsylvaniaiand even the Governor. Things became so bad that a legislative committee looking into New York-.State, pexmitting the illegal profit of $7©-millionn a year to organized crime tocontinue,will eventually be faced' with the same problems they have found themselves in in Pennsylvania. The failure of theNewYorkStatehe~g~isla~tureand . the Governor to pass and sign the cigarette bills in Albany wiilll be accepted as aniopen invitation for organized crime to expedite the takeover of cigarette distribution within the City and State of New York. ###