Pubdate: Sun, 30 Mar 2008
Source: Asbury Park Press (NJ)
Copyright: 2008 Asbury Park Press
Contact:  http://www.app.com/
Details: http://www.mapinc.org/media/26
Author: Jason Method

SHOULD JERSEY TAX ILLEGAL DRUGS NEXT?

Some States Have "Crack' Or "Grass" Tax

New Jersey officials levy scores of taxes and fees, but  here's one
they haven't tried yet: a tax on illegal  drugs.

More than 20 states have passed a so-called "crack tax"  or "grass
tax" on illegal drug dealers. Former New York  Gov. Eliot Spitzer was
also trying to pass such a levy  in the Empire State before his sudden
resignation.

In most cases, the premise is simple: Drug dealers are  required to
purchase tax stamps for their caches of  drugs after purchasing them.
If they don't -- and law  enforcement finds the drugs during an arrest
- -- the  dealers are reported to the state's Division of  Revenue,
which requires them to pay up.

New Jersey is not considering such a tax, state  officials said. But
law enforcement officials are able  to seize money or property through
drug asset seizure  laws. State law requires that proceeds from the
seizure  be used for law enforcement purposes, such as new  equipment
and training.

Other states, however, have found that illegal drug  taxes are a
modest moneymaker, and the taxes help  police, said Verenda Smith,
spokeswoman for the  Federation of Tax Administrators in Washington,
D.C.

No one actually expects drug dealers to pay taxes on  sales, Smith
said. But states nonetheless set up a drug  tax stamp that is for sale
at state offices and  available without requiring buyers to divulge
their  identity; others promise to keep the information  confidential,
so criminal cases cannot be built. That's  so residents have an
opportunity to comply, and the  drug-tax programs can pass muster with
the courts.

Theoretically, dealers could walk into an office and  buy the stamps
and put them on containers holding the  drugs to prove they paid the
tax, But, typically, they  do not, Smith said.

"If you get somebody, and you get their (cash) stash  and keep it from
getting back on the street to feed  drug buys, then you've done
something," Smith said.  "It's not a lot of revenue in the big scheme
of things,  but it does help."

The states' taxes usually set a rate based on the  weight of the
drugs. For example, North Carolina  assesses 40 cents per gram of
marijuana stems, $3.50  per gram of marijuana, $50 for each gram of
cocaine,  and $200 per gram for most other illegal drugs.

In Tennessee, dealers are taxed $50 per gram of cocaine  and $3.50 per
gram of marijuana. The payments are then  divided up -- 75 percent of
the revenue goes to the  police department that made the arrest and
seizure, 25  percent goes to the state.

Tennessee has collected $7.3 million through 4,000  drug-money
confiscation cases since the tax was  instituted in 2005.

But while such laws have been passed, they have been  challenged in
the courts in a number of states.

Officials in Tennessee, for example, are currently  awaiting word from
the state Supreme Court on the law's  constitutionality. In September
2007, an appeals court  ruled against the tax.

Stamp collectors also buy enough stamps to cover the  printing costs
to the state, Smith said. Tennessee has  sold 990 stamps since the
program began, for $3,879.

The state taxes have been active for about 20 years,  Smith said.
Opponents have criticized the taxes as  either precursors to the
legalization of drugs or  heavy-handed attempts to take money from the
poor.

"There's a law enforcement idea behind it," Smith said.  "It makes
sense if you look into the details. (But)  yes, everyone likes to poke
fun at it."
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