James Salzer of the Atlanta Journal Constitution covered yesterday’s meeting of the Senate study committee on cigarette tax evasion.

Tobacco taxes vary wildly from state to state, and the  1950s era tax stamps used by Georgia and most other states are easily counterfeited.  Although Georgia’s $.37 per pack tax is among the lowest in the country, every neighboring state has an even lower tax.  South Carolina’s tax, at seven cents per pack, is the lowest in the nation.

A tractor trailer of cigarettes bought in South Carolina is worth $60,000 more when it crosses the Georgia line, and experts estimate that Georgia is losing as much as $20 million per year from smuggling. 

In the higher tax states, cigarette smuggling is more lucrative than the drug trade, without the risk of severe criminal penalties. 

Philip Awe, chief of alcohol and tobacco enforcement for the United States Justice Department’s Bureau of Alcohol, Tobacco, Firearms and Explosives, briefed our committee on federal efforts to control cigarette smuggling. 

Although large scale cigarette smuggling has long been dominated by organized crime, two recent cases involved Islamic terrorist groups.  There is also evidence that the Chinese Army, which operates a dozen cigarette manufacturing plants, is exporting counterfeit Marlboros and other high end cigarettes, complete with phony tax stamps.   

In response, California recently made its tax stamps more difficult to counterfeit, adopting technology currently used with credit cards and bank notes.  We heard from two technology vendors about ideas to improve Georgia’s system of tax stamping.  

We also heard from Greg Martin, executive director of the Southern Association of Wholesale Distributors, a trade group of cigarette wholesalers.  He shares the concern about smuggling (his members lose money from it, too) but does not want the expense of any new technology shifted to his members.

Bart Graham, our Commissioner of Revenue, has the converse concern.  He does not want the cost of any new technology coming out of his department’s budget.

I am persuaded that something must be done.  I will keep you posted as the study committee continues its work.

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The Lieutenant Governor asked me to chair a study committee on cigarette tax evasion.  Our first meeting will be tomorrow, Thursday, October 4, at 10:00 a.m. in Room 450 of the State Capitol.

Tobacco taxes vary wildly from state to state, and “tax stamps” are easily counterfeited.  In fact, federal officials have identifed cigarette smuggling as a major source of funding for Islamic terrorists.

I am looking forward to learning more about this issue.

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I support virtually every practical limitation on the power of government to tax, and as a general matter, favor the taxation of consumption over productivity or its fruits.

But I will admit to being initally skeptical about the workability of Speaker Glenn Richardson’s plan to eliminate all taxes on real and personal property.  These taxes are, for the most part, collected by local governments and eliminating them would require an entirely new mechanism to fund the operations of our cities and counties.

Last week, the Speaker presented his GREAT Plan to the North Fulton Chamber of Commerce.  After hearing him out, my skepticism has given way to open mindeness.  There are many details to be worked out, and I remain far from convinced, but the Speaker makes the excellent point that if we were designing a tax system from scratch, no one would suggest the one we have now.

Property taxation was created as a way to tax farm income.  When property taxes were first levied, only planters and farmers owned land, and the tax came due in the fall, right after the harvest.  It made sense two hundred years ago.   It made sense one hundred years ago.  But does it make sense today?

Most politicians shy away from bold ideas, calculating that political longevity is best maintained by the avoidance of controversy.  The Speaker is to be commended for putting forward a very bold and thought provoking proposal.  I am looking forward to the debate.

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The Lieutenant Governor has asked me to serve as chairman of two Senate study committees, the Telecommunications Taxes, Fees and Franchising Study Committee and the Cigarette Tax Evasion Study Committee. I have spent a good deal of time this summer preparing for hearings this fall.

I have set the date, time and place of the first two meetings of the telecommunications study committee. The first meeting will be Wednesday, September 5, at 1:00 p.m. in Room 450 of the State Capitol. The second meeting will be Thursday, September 20, at 10:00 a.m. in the same place. We will hear from the Georgia Department of Revenue at the first meeting, and we will begin examining various legislative proposals at the second meeting. A number of issues have been raised, and I will write about them here in more detail later.

The Lieutenant Governor appointed Senators Chip Rogers, Bill Heath, Jack Murphy and Tim Golden to serve with me. Senator Rogers authored the resolution creating the study committee.

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I just finished watching the Iowa Republican Debate moderated by George Stephanopoulos, which was rebroadcast this afternoon on C-SPAN.  Mike Huckabee again urged adoption of the Fair Tax, the proposal advanced by Congressman John Linder to replace all income, capital gains, estate and payroll taxes with a 23% national sales tax. 

I knew that Governor Huckabee supported the Fair Tax.  I did not realize that Rudy Giuliani, John McCain and Mitt Romney had all ruled it out.  Giuliani’s answer to the Fair Tax question, in particular, was disappointing.  He expressed puzzlement over the Fair Tax’s ”complicated” details.  When Tom Tancredo suggested that the ex-mayor read the Fair Tax Book written by Neal Boortz and John Linder, Guiliani shouted out that he already had, prompting Tancredo to wonder aloud why he was still having such difficulty understanding the details.  I wondered the same thing myself.

I am hopeful that Fred Thompson will embrace the Fair Tax when he enters the Presidential race.  When he was in Atlanta last month, he indicated that he was open minded.

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The sales tax holiday, annually reauthorized by the General Assembly and signed into law by the Governor, exempts back-to-school shopping from the sales tax.  The 2007 sales tax holiday begins tomorrow (actually tonight, Thursday at 12:01 a.m.) and ends Sunday at midnight.

The Atlanta Journal Constitution today published this helpful list describing the items eligible for the sales tax exemption.  The Georgia Department of Revenue has more detailed information at its website.

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The Lieutenant Governor has asked me to chair two study committees, one on communications taxes and fees and the telecommunications franchise process and the other on cigarette tax evasion.

Brian Johnson in the Senate Research Office is helping me organize the work of these committees.  If you have suggestions for either study, let one of us know.

I have also been appointed to a third study committee, chaired by Senator Eric Johnson, on reproductive and genetic technology.  Melanie Stockwell in Senator Johnson’s office is coordinating the work of this study committee.

For a complete list of 2007 study committee appointments, visit the Senate website.

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House Democratic Leader DuBose Porter has written to the Governor urging a special session of the General Assembly to consider a reduction of the gas tax.   A special session for any purpose would force the Governor to immediately transmit his budget vetoes to the House, bringing that issue to a head now as opposed to next January when the fiscal year will have been largely completed. 

I do not anticipate the Governor calling a special session.

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The Senate Rules Committee met this afternoon to set the calendar for tomorrow, Day 29.  We will have a full calendar, with over thirty bills.  Senate Bill 148, the Saving the Cure Act, willl be on the calendar tomorrow, along with Senate Resolution 5, the Taxpayers Dividend Act. 

Senate Resolution 20, the Taxpayer Protection Act, sponsored by Senator Chip Rogers, is also on the calendar.  As I mentioned in an earlier post, the provisions of Senate Resolution 5 have been incorporated into Senate Resolution 20.  If Senate Resolution 20 passes tomorrow, my plan is to withdraw Senate Resolution 5.

The only bill that generated controversy during the Rules Committee meeting was Senate Bill 154 by Senator Jack Murphy.  The bill deals with solid waste contracts, requiring municipalities to honor existing contracts when they annex land.  It is vigorously opposed by the Georgia Municipal Association, which complains that the language is vague and could have unintended effects.  Senator Murphy plans to introduce amendments tomorrow that he believes will address all outstanding concerns.

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I have proposed a constitutional amendment, Senate Resolution 248, which would stop the double taxation of municipal property owners.  It applies to property taxes and provides, in essence, that:

No county shall levy ad valorem taxes or assessments within a municipality for services that are provided by the municipality.

Under my plan, counties would tax for the services that they provide (sheriff, courts, etc.).  Cities would tax for the services that they provide.  If you live in a city with its own police department, why should you pay a second time for a county police department?

I have heard from a number of mayors and city council members, and they are thrilled with this idea.  County commissioners, not so much.  What do you think?

[UPDATE]  Peach Pundit is discussing this idea here.

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