BILL WOULD TAX DRUG DEALERS

Should Drug Traffickers Pay Taxes On The Illegal Substances They
Sell?

Proposed legislation would authorize the state to collect excise tax
on controlled substances and alcoholic beverages that are illegally
possessed.

Bill sponsor Sen. Randy McNally (R-Oak Ridge) said his proposal was
modeled after North Carolina law. The state of North Carolina has
netted about $6 million annually during the past five years by taxing
illegal substances, McNally said.

The state would issue stamps that people dealing with illegal
substances could buy in lieu of taxes. The stamp would not provide any
criminal protection. In reality, nobody expects criminals to buy
stamps for illegal substances but the state has to put some mechanism
in place that criminals could access to meet the law.

"About the only people that purchase the stamps are stamp collectors,"
McNally said.

However, if arrested the possessors of illegal controlled substances
would have to pay the amount of taxes owed and penalties for failing
to pay taxes.

McNally said the fiscal note on the bill talks about a net income of
about $3.6 million per year for Tennessee; 75 percent would go to the
state or local law enforcement agency that was involved in the
findings of the illegal drugs and 25 percent would go to the state
general fund.

"This is money that I hope could eventually be used to fund things
like increasing the penalties for methamphetamine and also the drug
interdiction program on a state and local level," McNally said.

Sen. Jim Kyle (D-Memphis) asked to defer the bill for two weeks to
allow time to meet with the comptroller's office and address the issue
as to where the collected fines would be going.

"Years ago . we really tried to get away from earmarking essentially
the bounties on particular activities of law enforcement," Kyle said.

Kyle said it might be better if all the money collected from penalties
went to the state's general fund.

Sen. John Ford (D-Memphis) questioned how the proposed legislation
could be enforced. He said any money seized during an arrest would be
confiscated and could not be used to pay for back taxes.

"I think the law we have right now is sufficient," Ford
said.

McNally said the bill would provide that the state could go after
assets not tied to the criminal act for which the person was arrested.

The calculation of back taxes would follow a schedule which suggests
that, for example, for each gram of cocaine $50 would be owed, $200
for each unit of 10 of OxyContin, or $3.50 for each gram of marijuana,
etc.

The legislation will again be taken up in the Senate Finance Committee
in two weeks. It currently is in the House Judicial Committee without
any action scheduled.