, Salem, MA

Local News

October 22, 2013

Tobacco tax seen as fueling black market

BOSTON — The $1-per-pack jump in cigarette taxes and the more than doubling of chewing tobacco taxes will provide an incentive for organized crime to draw more profits out of Massachusetts users while stiffing the state, tobacco industry executives told a state panel yesterday.

“I’ve heard some criminals celebrating tax increases,” Steve Grimaldi, director of Corporate Security for Reynolds American Inc., told members of the Illegal Tobacco Commission, an advisory panel set up as part of July’s tax law.

New tobacco taxes are expected to raise $157.5 million annually, delivering a jolt of revenue for state spending priorities while policymakers are steering new state dollars into public transportation.

But while some lawmakers cheered the potential for higher costs to discourage smoking, others — like Ipswich Rep. Brad Hill (R) — say tobacco tax increases are a “stimulus package” for New Hampshire, and five “mom and pop” shops in his district closed after the last cigarette tax increase.

“Every time you increase this type of a tax, you’re going to see an increase in sales in New Hampshire,” Hill had said previously in a floor debate on the tax bill. “In New Hampshire within a month of passing the last tax increase, if you went to the smoke shops — I counted the plates — over 80 percent of the plates are Massachusetts consumers. That’s what’s going to happen.”

The potential boon for organized crime was not a major point of argument in the tax debate, which also included a computer services tax.

That tax was repealed by the Legislature soon after its passage, with Hill and Senate Minority Leader Bruce Tarr among the leaders of a push for the state to back off.

“I think that’s why the Legislature recommended the commission, because it is complex with a lot of ramifications,” Department of Revenue Commissioner Amy Pitter told the News Service, saying the commission will be able to delve into aspects financial and criminal before releasing its report.

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