Inspired by Armstrong case, McCormick proposes bill on cigarette tax stamps

House Majority Leader Gerald McCormick has filed legislation inspired by state Rep. Joe Armstrong’s reported dealings in state cigarette tax stamps — allegations that led to the Knoxville lawmaker’s indictment on federal tax fraud charges.

The state’s political party leaders, meanwhile, have engaged in some back-and-forth partisan sniping over the legal troubles of Democrat Armstrong and Republican Rep. Jeremy Durham of Franklin, who was investigated for prescription drug fraud but not indicted.

McCormick, R-Chattanooga, introduced HB1440 last week. Armstrong was indicted in June and is facing trial Feb. 23.

Armstrong allegedly collaborated with a tobacco wholesaler to buy Tennessee cigarette tax stamps in 2007 before a tax increase that Armstrong supported. When the tax increase was enacted, the tax stamps were sold a profit of more than $500,000 and Armstrong failed to pay the appropriate federal income tax on that profit, the indictment alleges.

McCormick’s bill would require a tobacco wholesaler, in the case of a future cigarette tax increase, to promptly pay the extra tax on any stamps the dealer is holding at the time the tax increase occurs.

“We need to reassess the tobacco tax rate process in the state, and I believe this legislation will restrict future attempts by individuals to game the system and make profits off rate increases,” McCormick said in a statement distributed to media.

The House Republican Caucus has scheduled a vote Jan. 12, the day the General Assembly begins the 2016 session, on whether Durham, R-Franklin, should be ousted from his current GOP leadership position as House majority whip.

This follows media reporting on Durham being investigated for prescription fraud, on his writing of a letter to a judge urging leniency in sentencing a former youth pastor convicted on child pornography charges and on House Speaker Beth Harwell arranging for Connie Ridley, director of the Legislature’s administrative arm, to counsel Durham on “appropriate professional behavior” for reasons not made public.

In a news release, Tennessee Democratic Chair Mary Mancini said the Durham situation is “just another example of Tennessee Republicans putting politics before the people of Tennessee.”

State Republican Chairman Ryan Haynes issued a rebuttal news release citing Armstrong’s case and declaring, “Hypocrisy is alive and well in the Tennessee Democratic Party.”

The Republican release featured a rewritten version of Mancini’s release, swapping Durham’s name for Armstrong’s name and “Republicans” for “Democrats.” For example, Mancini declared that “Republicans and their leaders, Harwell and (House Republican Caucus Chairman) Glenn Casada, would rather sweep Durham’s bad behavior under the rug. Until now, that is, when the stories about Durham’s bad behavior have started to leak out and they have begun to worry about the affect it is having on their donors.”

The Republican rewrite transforms that comment into a declaration that “Democrats and their leaders would rather sweep Armstrong’s bad behavior under the rug. Until now, that is, when the stories about Armstrong’s federal indictment have started to leak out and they have begun to worry about the affect (sic) it is having on their donors.”

In an emailed rejoinder to the Republican rejoinder on her news release, Mancini said:

“Republicans know that there’s a difference between allowing a case to work its way through the process and sweeping bad behavior under the rug, which is what they have continually done with Jeremy Durham. I’m not surprised though, since Republicans have always been the party that deflects responsibility to avoid accountability.”

McCormick said in an interview that he thought Haynes’ release was “pretty witty” and does believe that Republican legislators “are dealing with our issue, maybe awkwardly” while Democrats have done “absolutely nothing” in dealing with Armstrong’s situation.

But he said the cigarette tax bill is not intended to be a “just a kick-Joe Armstrong around” proposal and he hopes it will have bipartisan support in closing a “loophole” in state law that “I never knew existed” until reading reports on Armstrong’s indictment.

“It’s just something we need to fix,” he said.