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."