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N.Y. Gov. Proposes Drug Tax
January 24, 2008

New York Gov. Eliot Spitzer this week proposed imposing a tax on sales of illicit drugs, adopting a concept already in place in 29 other states, the New York Times reported Jan. 24.

Seeking to close a $4.4-billion budget gap, Spitzer proposed a commodity tax on drugs as part of a broader package of taxes and fees, perhaps hoping to emulate the success of states like North Carolina, which collected $11 million in taxes on illegal drugs and alcohol last year.

Spitzer estimated that a drug tax could raise $17 million annually for New York. The tax would be $3.50 per gram of marijuana and $200 per gram for other drugs, but paying the tax would not shield dealers from criminal prosecution on possession charges.

In other states, such laws have led to litigation, with some struck down for violating constitutional protections against self-incrimination. As a result, many state laws now say that taxes can be paid anonymously, and that taxpayers cannot be reported to police.

In North Carolina, a federal appeals court ruled that the states was violating double-jeopardy rules by effectively punishing drug dealers twice, first with jail time and then with high taxes. The North Carolina tax was subsequently amended, and the state has a special division within its Department of Revenue devoted to collecting drug taxes.

Since few dealers pay the tax up front, most of the collections come after dealers are arrested on criminal charges.

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Seeking to close a $4.4-billion budget gap, Spitzer proposed a commodity tax on drugs as part of a broader package of taxes and fees,

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Carl Strock THE VIEW FROM HERE
Will stamps for drugs really stick?
Carl Strock can be reached at 395-3085 or by e-mail at carlstrock@dailygazette.com.

    Perhaps you’re wondering what my favorite new tax or fee is in Gov. Spitzer’s proposed budget for the coming year.
    The answer is easy. It’s the proposed tax on drug dealers: $3.50 for a gram of marijuana, $200 for a gram of more serious material, like cocaine or heroine, the tax to be paid through the purchase of stamps, and the stamps to be affixed to the illegal product, much like the stamp that you see on a pack of cigarettes.
    Is that creative or what? The governor wrote $13 million in new revenue into his budget in anticipation of this tax being adopted by the Legislature and predicted $17 million would be collected in later years.
    Of course he doesn’t expect that drug dealers working the streets of Albany or Schenectady are actually going to show up at the Department of Taxation and Finance and buy these stamps. He’s not that naïve.
    The experience of other states that have such laws, like North Carolina, is that the only people who buy the stamps are stamp collectors.
    States get the money from drug dealers after the fact, not before. A guy gets arrested with a satchel of crack, let’s say, and in addition to the drug charges, the state can nail him for having failed to buy the required stamps and can seize his money or his property to pay the tax retroactively, along with the customary interest and penalties.
    The nice thing from the government’s point of view is that it can do this even if the guy somehow beats the drug charge and walks free.
    So the tax is really a device for seizing money and property from drug-dealers and drug-users after an arrest.
    But is that fair? Is it even legal? Can you require someone to pay a tax up front on an activity that he can be arrested for if he admits to it? Isn’t that like selling tax stamps on robbery or murder and then nailing accused murderers and robbers for tax evasion and confiscating their bank accounts? Isn’t it just a tiny bit dishonest?
    Well, I’m glad you asked that too, because similar laws in other states have indeed been found unconstitutional on the grounds that they violate our right not to incriminate ourselves. Per the Fifth Amendment, you cannot force someone to admit to a crime, which is what a customer would have to do to buy those tax stamps.
    So some states, like North Carolina again, have refined their laws to meet that objection, and they now allow buyers of drug stamps to remain anonymous. You can just come in to the tax office, buy your stamps, and go out again without having to say who you are, which is a nice little dodge on the part of the state, I think.
    Gov. Spitzer, for his part, proposes to grant a form of immunity in that any information obtained from a buyer of drug stamps could not be used against that person in a criminal proceeding. So you couldn’t be charged as a drug dealer on the grounds that you bought the stamps — though I suppose maybe you could still be tailed home and put under surveillance.
    Thus does he plan to avoid the accusation of requiring self-incrimination.
    Will it pass muster? In New York, I don’t know. It did not pass muster in Tennessee, where that state’s Court of Appeals ruled last year that a similar drug-tax law was no good.
    “The legislature cannot name something to be a taxable privilege unless it is first a privilege,” the court ruled, noting that the tax specifically did not apply to peo- ple legally authorized to possess drugs, like pharmacists and doctors, but only to those who were forbidden to possess them.
    Forbidding something on the one hand and taxing it as if it were a privilege protected by the state on the other hand, the court said, was “arbitrary, capricious, and unreasonable.”
    In my experience that could apply to many acts of government, though I will not press the point.
    Nor will I press the point that if the state desires to make money from the drug trade, an easy way to do it would be to legalize marijuana and tax it the same as tobacco and alcohol, having in mind that marijuana is less dangerous than those other drugs.
    I won’t press the point, because I know it’s futile. The ban on marijuana is one of those acts of faith that right-thinking people in government are committed to almost religiously, and I don’t wish to violate anyone’s faith.
    One thing I do get a kick out of is the after-market, I guess you could call it, in drug stamps. Check out the Web site flyingbuffalo.com, for example, which is a harmless game company, and look at their offerings of “Unusual Stamps,” to see what I mean.
    From Nebraska they offer “one of the best-looking stamps available,” featuring a skull-and-crossbones design, with a hypodermic needle substituting for one of the bones and stating “DRUG TAX PAID.”
    This is splendid government-inspired graphic work, and it can be yours for $25, to put in your album.
    From Texas there is one described as possibly “the very best stamp so far,” with a picture of the grim reaper, black-hooded and carrying a scythe, saying “DRUGS,” with arrows pointing to “DEATH” and “TAXES,” which is a nice Texas touch.
    “Really cool,” Flying Buffalo says. “Sadly, I am all out of them.”
    Don’t weep, however. Hop over to eBay and you can find one there on a “buy it now” basis for $19.99, along with a few dozen other marijuana stamps from other states.
    I notice that plain ordinary stamps, with just a righteous slogan like “Say No To Drugs,” sell for a mere few dollars, while those with lurid graphics — grim reapers and the like — bring more, so if Gov. Spitzer is thinking very far ahead, he might consider enlisting a good graphics designer and making of this market what he can.
    He might sign up someone who specializes in fantasy dragons and saber-toothed warriors so that even if drug dealers shun them, as expected, we could still make out in the collector market, and the state of New York will be better able to pay for its necessary operations.

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If you get caught selling drugs now they can seize your money, your car, your house, and any other assets that are deemed gained illegally thru the sale of drugs so why do we need another tax/fee on top of that?  

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Forbidding something on the one hand and taxing it as if it were a privilege protected by the state on the other hand, the court said, was “arbitrary, capricious, and unreasonable.”

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Isn’t that like selling tax stamps on robbery or murder and then nailing accused murderers and robbers for tax evasion and confiscating their bank accounts? Isn’t it just a tiny bit dishonest?
    Well, I’m glad you asked that too, because similar laws in other states have indeed been found unconstitutional on the grounds that they violate our right not to incriminate ourselves. Per the Fifth Amendment, you cannot force someone to admit to a crime, which is what a customer would have to do to buy those tax stamps.