Prevent All Cigarette Trafficking Act Of 2009

Floor Speech

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Mr. WEINER. I thank you very much, and I thank the ranking member for his informed remarks about this bill. I want to thank also the chairman of our full committee for reaching it to this point.

You know, the fact is that the various States have different levels of tax on their tobacco products. Some States are very high. My State of New York is among the highest. Our city puts an additional tax. It is one of the prerogatives of the different States--some have chosen to tax more; some have chosen to tax less.

But the fact is that there is an enormous economy around avoiding that tax, essentially violating the law. There are Internet tobacco sites that exist with their sole purpose apparently being to deliver tobacco to people outside the realm of taxation. That's a problem. It's a problem not just because it makes it impossible for States to collect taxes that they've levied, but it's also a problem because the sale of Internet tobacco encourages underage smoking. It also makes it very easy for anyone who wants to commit illicit acts.

When the Government Accounting Office took a look at a smuggling ring that they discovered in the early part of this century, they found that Hezbollah, the international terrorist organization, was using this difference in taxes to fund their illicit activities. Here's how it worked: They would purchase tobacco at a low tax rate in North Carolina; they would ship it to a higher tax State in Michigan; and the difference that they'd save by selling the cheaper tobacco in Michigan would produce millions of dollars.

But it is not just international terrorist organizations and not just underage smokers that are using this gap in the laws to undermine our interstate commerce. It is also just everyday citizens who have become scofflaws by using Internet tobacco sales.

So how does this PACT Act, which was sponsored by Senator Kohl and is sponsored by my Republican friends in the House and passed by a broad margin when we earlier considered this, how does this solve the problem? Well, it does it in a couple of ways.

One, it is already by agreement that UPS, FedEx, DHL, the major common carriers have said, You know what? We think it's wrong to be facilitating this by making deliveries for Internet tobacco companies, so we're not going to do it. They've agreed to it. It's in place in all 50 States. There's only one common carrier that today still delivers tobacco through the mail--the United States Postal Service. They came to us and said, Congress, if you really want us not to mail this, you've got to define what a nonmailable material is, and you've got to add that to the list. That's what the PACT Act does. It says that you can no longer mail tobacco through the mail once this becomes law. So it's going to make it very, very difficult, if not impossible, for Internet tobacco sales to continue.

A second thing that it does is that transaction that I described, where you buy something cheaply and don't pay taxes on it or pay a lower tax than you're supposed to in your State, is already a violation of the law. But effectively, those violations are never prosecuted because under the Jenkins Act, which is the structure of the law that enforces this, it's only a misdemeanor. Well, that's going to change. In this bill, it's going to become a felony. If you think you're going to skirt the law by driving to your neighborhood Indian reservation, buying boxes and boxes or cases and cases of cigarettes, not paying taxes on it, well, now that's a violation of the Jenkins Act that rises to a felony. So it might make sense for the U.S. Attorney or for an attorney general to say, You know what? We're going to do a stakeout here, and if we find untaxed tobacco is being sold or undertaxed tobacco is being sold, we're going to crack down on it.

A third thing that it does is it increases the enforcement of the act that is supposed to happen. When you buy something in a low tax State, you're supposed to pay the taxes in your home State. So this is going to increase the reporting requirements. Anyone that sells these products is going to have to report back to your home State on the taxes that are owed.

Now, what is this going to mean? In addition to cutting down on underage smoking, this is going to mean that States and localities are going to find that they're going to start collecting the taxes they're supposed to. And again, we have people who support lower tobacco taxes on this bill, people who support higher tobacco taxes on this bill. This is not an issue of whether you think there should or should not be tobacco taxes. I think there is bipartisan agreement that there is, within the right of the 50 States, the ability to levy this taxes, and the sovereignty of those 50 States depend on them being able to collect it. What this is going to be able to do now is we are going to make sure that, in the context of this debate, that these tobacco taxes get collected.

No one knows exactly what was being evaded here, but there was one estimate that said as much as $1 billion in New York State alone is being evaded, and we are finally going to be able to get control of this problem. All 51 State attorneys general have supported the PACT Act, the National Association of Convenience Stores, the American Wholesalers Association. Even the major tobacco companies who understand that there is a regime that has been set up in the 50 States, they want it to be followed, too. So companies like Altria and Lorillard are saying, You know what? While there are a lot of hot debates about tobacco use in this country, there should not be a hot debate about whether or not we enforce the laws of the 50 States.

I also want to thank my Republican colleagues here. Mr. Smith and his colleagues and a bipartisan coalition said, You know what? You're going to be tough on crime; we're going to be tough on this crime as well, and have every step of the way made suggestions that have improved this legislation.

And also--this is the part that is the toughest to say--I want to thank my colleagues in the Senate. There have been 290 times that we have sent legislation in their direction, and while I think it was Benjamin Franklin who called the Senate ``the cooling saucer of our democracy,'' they've been more akin to a meat locker in recent months. And I want to commend Senator Kohl for figuring out a way to extract something from that frigid environment. Hopefully, we'll be getting this to the President's desk.

This is an important thing, what we're doing here. This is going to allow States to collect the revenue they're supposed to have. Every antismoking organization that's concerned about underage smoking has been active in making this happen--27 public health groups, the Campaign for Tobacco-Free Kids, the American Heart Association, American Cancer Society, the American Lung Association. I think all of us who are concerned about keeping tobacco out of the hands of children recognize that this giant gap in our law that allows them to get it on the Internet without any age verification, which is another element of this bill that's going to become law, has a stake in making this bill a reality.

I want to thank Mr. Cohen for so deftly managing this bill.

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I would like to thank members of the Democratic and Republican staff of the Judiciary Committee and my staff, who worked tirelessly on this legislation. In particular, I would like to thank Perry Apelbaum, Ted Kalo and Danielle Brown on the House Judiciary Committee, Jesselyn McCurdy, Kimani Little and Caroline Lynch with the Judiciary Subcommittee on Crime, Terrorism and Homeland Security, Marni Karlin on the Senate Judiciary Committee, John Mautz with Congressman Coble's staff and Joe Dunn on my staff.

I would also like to thank Artie Katz, Lenny Schwartz and Steve Rosenthal with the New York Association of Wholesale Marketers, John Hoel and Sarah Knakmuhs with Altria, Eric Lindblom and Brian Hickey with the Campaign for Tobacco Free Kids, Anne Holloway with the American Wholesale Marketers Association, Blair Tinkle with the National Association of Attorneys General, Lyle Beckwith with the National Association of Convenience Stores and Laurie McKay with Dickstein Shapiro.

I urge my colleagues to support this important legislation.

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