Looking at the data in retrospect, by the mid-1970s the absence of any tax increase since 1972 seems to have improved the situation in New Jersey. Legally taxed sales were holding steady.

However, judging by the tone of the tax administrators' testimony at the time, strong measures were needed, mainly in law enforcement. Tax administrators were given police powers in 1973.[171] In 1974, seven mid-Atlantic states officially formed the Eastern Seaboard Interstate Cigarette Tax Enforcement Group to respond to the growth of organized crime in the industry and to expand surveillance of suppliers in North Carolina and other low-tax states.[172] And in 1975, New Jersey started teaching counter-smuggling techniques to local police in the Southern part of the state.

There was both anecdotal and academic support for their alarm. The seven mid-Atlantic states had seized almost a million cartons in a little over two years, and in 1977, the Advisory Commission on Intergovernmental Relations, a think tank created by Congress, published "Cigarette Bootlegging: A State and Federal Responsibility." The study concluded that state tax differentials were the major underlying cause of cigarette tax evasion and bootlegging, and that enforcement actions to date had been ineffective. It identified "a serious problem" in 14 states and "a moderate problem" in another eight states. New Jersey was among the states with the most serious crime problems and the most lost tax revenue.

The study's substantive recommendations echoed the get-tough sentiments of state tax administrators: The federal government should tax military and Indian sales; make interstate transportation of cigarettes a felony; and state governments should hire more personnel and enact harsher penalties for those caught. John Shannon, ACIR assistant director, commented in testimony about the report: "Some of the testimony before our committee indicated how serious and how ruthless the organized crime infiltration of bootlegging had become, especially in New Jersey and New York."[173]

The ACIR study discussed tax differentials at length, but shied away from explicitly recommending that high-tax states cut their rates to reduce the smugglers' incentive. Most of the states, however, did get the word from their overwhelmed tax administrators, either directly or through this study, that the crime was tax-induced.

USING THE INTERNET TO THWART CIGARETTE THEFT

Thanks to security cameras in convenience stores, the public can use the Internet to review cigarette crimes and help find suspects. One blurry surveillance video posted on Aug. 14, 2008, comes from a news broadcast courtesy of NBC in Toledo, Ohio. The segment is titled, "Watch man steal cigarettes over BP clerk's body" (see http://www.nbc24.com/news/video.aspx?id=175082, accessed Nov. 23, 2008). The cigarette thief was not the murderer, but walked in on a dying or deceased clerk and stole cigarettes from behind the counter, instead of helping.

Cigarettes — probably due to their high street value — are almost as valuable and liquid as cash to these thieves. Cigarettes' value as contraband is on display in two typical videos, one from Oklahoma and one from Ontario. In Oklahoma, the video clearly shows one man of a three-man team making a beeline for the cigarettes held behind the store counter during an ATM heist (see "With video release, police hope for clues in ATM theft," The Oklahoman,  http://newsok.com/article/3301483/, accessed Nov. 23, 2008). The second video, from Ontario, Canada, shows a typical "smash and grab." The robber breaks a window, setting off an alarm, seizes both cash and cigarettes, and departs in under one minute (see "Man steals Cash, Cash register and cigarettes in under a minute," LiveLeak, http://www.liveleak.com/view?i=e5f_1204661179, accessed Nov. 23, 2008).

Many of the harsher legal penalties and expensive law enforcement changes ACIR recommended came to pass. New Jersey increased its enforcement staff by 50 percent by 1978, and in 1980 the state began fingerprinting people in the cigarette distribution business.[174]

By the early 1980s, New Jersey had refrained from raising its rate for a decade, as had many other states. There was almost nothing good about the high inflation that prevailed in the 1970s, but it did cut into the profit of bootleggers, pushing up the price of tobacco and reducing the economic incentive for customers to seek out low-tax cigarettes and for smugglers to bring them in.

New Jersey raised the tax twice in quick succession during the summers of 1982 and 1983, and again in 1987, but all were comparatively small increases, so the economic impact of the tax, accounting for inflation, continued to fall through the 1980s. This probably accounts for much of the era's stable and even slowly growing legally taxed sales.


[171] "Presidential Address," in Proceedings of the 47th Annual Meeting of the National Tobacco Tax Association (Chicago: Federation of Tax Administrators, 1973), 29.

[172] Philip M. Salafia, "The Eastern Seaboard Interstate Cigarette Tax Enforcement Group," Proceedings of the 49th Annual Meeting of the National Tobacco Tax Association (Chicago: Federation of Tax Administrators, 1975), 42. 

[173] "Alternative Solutions to Cigarette Bootlegging: ACIR's Evaluation," in Proceedings of the 52nd Annual Meeting of the National Tobacco Tax Association (Chicago: Federation of Tax Administrators, 1978), 25-27.

[174] "Report of the Committee on Legislation and Legal Activities," in Proceedings of the 54th Annual Meeting of the National Tobacco Tax Association (Chicago: Federation of Tax Administrators, 1990), 49, 52.