SPITZER WANTS N.Y. TO TAX ILLEGAL DRUGS

Governor Sees Levy As Way to Help State Cut Budget Deficit

If you can't beat it, tax it.

That seems to be the axiom in New York these days, where Democratic
Gov. Eliot Spitzer, struggling to close a $4.4 billion budget gap,
has proposed making drug dealers pay tax on their stashes of illegal
drugs. The new tax would apply to cocaine, heroin and marijuana, and
could be paid with pre-bought "tax stamps" affixed to the bags of dope.

Some critics in the legislature are asking what the governor has been smoking.

"I guess if it moves, he'll tax it," said Republican state Sen.
Martin Golden, who dubbed the proposal "the crack tax." Some
opponents said that because cocaine and marijuana would be subject to
the new levies, it should more aptly be called "the crack-pot tax."

"How do I explain to my 16-year-old son that we're giving a certain
legitimacy to marijuana, cocaine and heroin?" asked Golden, a former
New York City police officer who represents a Brooklyn district. "We
are taxing an illegal substance." He added, "Is prostitution next?"

On the other side of the aisle, some Democrats, too, were stunned by
the plan. "My initial instinct is: I don't understand it," said Bill
Perkins, a state senator from Harlem. "Most of the dealers I'm
familiar with are petty crack dealers - most of them are crackheads.
They are broke, to say the least. I just don't understand how you
impose a tax" on broke crackheads, he said.

Taxing illegal drugs is more widespread than is generally known. At
least 21 states have some form of tax for illicit drugs, although
some of those laws have been challenged in courts, and others have
fallen into disuse. Almost all the remaining drug-tax laws are used
mainly by local law enforcement agencies as a way to seize drug money
and fund counter-narcotics operations.

The controversial idea grew out of the efforts to fight bootleggers
such as Al Capone during Prohibition - going after the bootleggers
for unpaid taxes often required a lighter burden of proof than a
criminal prosecution. Taxing illicit drugs gained popularity during
the 1980s and early 1990s, when prosecutors and law enforcement
authorities were pushing for mandatory sentences and other measures
to signal a crackdown on drugs and drug use.

"It was a way of getting tougher on criminals," said Joseph Henchman,
tax counsel for the Tax Foundation, a Washington-based educational
group. "It kind of boggles my mind. If you want to get tougher on
drug dealers, increase the penalties."

In September, a state appeals court ruled a drug law in Tennessee
unconstitutional, saying that an illegal substance could not be
taxed. In Massachusetts, that state's supreme court in 1998 ruled
that a drug tax was an unconstitutional form of "double jeopardy," so
it is not used, although it remains on the books, according to the
revenue department in Boston.

Allen St. Pierre, executive director of NORML, the National
Organization for the Reform of Marijuana Laws, called the drug tax "a
wacky idea. It's a quintessential example of the absurdity of the war
on some drugs."

Most states with such laws sell stamps that drug dealers can buy in
advance, like what Spitzer is proposing. Because no drug dealers are
known to buy the stamps and pay their tax in advance, the tax is
usually levied after they are caught.

Some states have designed distinctive drug stamps, often depicting a
marijuana leaf. Nebraska's drug stamp depicts a rolled joint crossed
with a syringe in front of a skull and what appears to be a
headstone, with the label "R.I.P."

In New York, Spitzer proposed the drug tax in his 2008-09 budget as a
way to deal with a projected shortfall, and in a memo said taxing
drug dealers would raise $13 million in the coming fiscal year. The
governor's office said the bill would contain strict secrecy
requirements, so drug dealers who paid their taxes would not be
incriminating themselves.

A tax stamp for a gram of marijuana would cost $3.50, and $200 for a
gram of cocaine, "whether pure or diluted," according to the
governor's proposal.