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Vern Jacobs' Taxwire

Commentary, news and reflections about
this taxing life, by Vernon Jacobs, CPA.

Jacobs is the co-author of Legal Ways to Save Taxes Offshore & Onshore, of Offshore Tax Strategies, of The Controlled Foreign Corporation Tax Guide and of Risk Management for Amateur Investors. He is the Editor & Publisher of the International Wealth Protection Monitor newsletter and the free Q&A service, the Jacobs Report on International Financial Planning. He is the President of Offshore Press, Inc. and is a member of the International Tax Technical Resource Panel of the American Institute of CPAs. He has been a CPA since 1962, with a focus on taxes since 1975. .

Vernon K. Jacobs, CPA

The War on Cigarettes

According to the Baltimore Sun (Jan, 9, 2007) AARP is mailing 350,000 leaflets urging recipients to return an enclosed card to their state representatives, asking for their support for the Healthy Maryland Initiative, to impose a $1-a-pack tax increase on cigarettes to fund the expansion of Medicaid, drug treatment and a pilot program to help small businesses with health insurance costs.

Until the tax is the same in every state, bootlegging is inevitable. To enforce the law, states will have to assign police to patrol the borders and to watch for local residents in stores just across the border. Because that won’t have a significant impact on the illegal importing of cigarettes, Maryland and other high tax states will have to impose stronger penalties on the illegal importing and will eventually try to impose jail time for violators.  

Because nicotine is a highly addictive drug, and users will either pay the higher prices or will continue to buy from illegal dealers, the next step will be for the various states to lobby Washington to declare cigarettes as a restricted drug so that users and dealers will be subject to the federal drug laws. In order to continue to buy cigarettes, smokers will either have to participate in an approved program to stop smoking or will have to buy cigarettes from street dealers. The government will pay tobacco growers to grow other kinds of crops.  Additional excise taxes will be imposed on cigarette producers and will put many of them out of business. But the demand from the smokers will lead to the illicit growing of tobacco and the production of cigarettes.  

That is certain to cause a major increase in the number of people in prison on drug charges. Illegal dealers will soon begin to establish territories for selling illicit cigarettes. Competition among dealers will lead to more violence and more police will be needed to stem the increase in crime. New prisons will be required to accommodate the illicit smokers, dealers, tobacco farmers and producers.  

In time, no one will remember how the “War on Cigarettes” began and no one will believe that it could be concluded by letting people buy cigarettes without imposing punitive and selected taxes to prevent people from causing harm to themselves.     


by Vernon Jacobs, CPA

Co-author of Legal Ways to Save Taxes Offshore & Onshore
http://www.offshorepress.com/legalways2save.htm

Contact Information: Email jacobs1@kc.rr.com.  Phone 913-362-9667, Fax 913-432-7174, U.S. mail to POB 8194, Prairie Village, Kansas, 66208. www.vernonjacobs.com

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Jacobs is the co-author of Legal Ways to Save Taxes Offshore & Onshore, with J. Richard Duke, JD, LLM.
Legal Ways to Save Taxes Offshore & Onshore

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