The "other" side of increasing cigarette taxes

As many as a quarter of all cigarettes smoked in Washington state are smuggled in from out of state or purchased tax-free online, by phone or by mail from vendors, forcing state officials to vigorously pursue contraband cigarette buyers, says the Seattle Times.

The state tax on a pack of cigarettes is nearly $2.03, the third-highest rate in the nation. The high tax has caused many to seek cigarettes elsewhere, which end up costing the state an estimated $200 million a year in lost revenue.

To combat this, the state has aggressively pursued people who buy illegal tax-free cigarettes:

o Washington has collected nearly $714,000 from about 4,500
people during the last three years.

o One Washington smoker has been informed by the state that he
owes around $8,000 in unpaid taxes, or around $617.72 for each
five-carton shipment ordered online.

o The state is even garnisheeing wages for those who don't pay;
in the example above, the state is taking 25 percent of the
man's wages, to repay what is owed.

"Cigarette-tax evasion continues to be a major problem in Washington state," Department of Revenue spokesman Mike Gowrylow said. "We believe everyone should pay a fair share of taxes, and we have an obligation to pursue unpaid taxes."

But Gowrylow also notes that the extreme cases are rare. The state has sought warrants in 31 cases, and most paid up at that point. Overall, the state has gone after people's paychecks only about eight times.

Source: Ralph Thomas, "State sends a message, smoker gets $8,000 bill," Seattle Times, February 16, 2007.

For text:

http://seattletimes.nwsource.com/html/localnews/2003574768_tobaccotax16m.html

For more on Taxes:

http://www.ncpa.org/sub/dpd/?Article_Category=20