McCormick drops bill inspired by Armstrong case

House Majority Leader Gerald McCormick has dropped an effort to change state law so that future legislators would be prohibited from dealing in cigarette tax stamps as Rep. Joe Armstrong is accused of doing.

Armstrong, D-Knoxville, faces trial in August on federal tax evasion charges stemming from what the indictment says was a profit of about $500,000 from cigarette tax stamp transactions in 2007. After reading reports of the indictment, McCormick, R-Chattanooga, said he was surprised that the transaction itself was legal and introduced HB1440 — also sponsored by Senate Majority Leader Mark Norris — to make it illegal.

But McCormick said he had encountered concerns with the legislation on several fronts and ultimately decided to drop the push for passage. Officially, he took it “off notice” last week in the House Agriculture Subcommittee, which has now closed for the 2016 session.

The majority leader said, however, that he still intends to take up the issue — though probably not until next year — by seeking a change in House rules governing legislator behavior.

Armstrong allegedly collaborated with a tobacco wholesaler to buy Tennessee cigarette tax stamps in 2007 before a tax increase — that Armstrong supported — was imposed. When the tax increase was enacted, the tax stamps were sold at a profit.

As drafted, 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.

McCormick said in an interview that the state Department of Revenue initially proposed revising the bill in a way that would have increased state revenue and “I didn’t like that.”

Further, McCormick said he realized that a “little guy who sells cigarettes in his business” would logically try to buy tax stamps in advance if he knew the tax was going up.

“If somebody wants to do something crooked, why make other people suffer?” he asked. “That’s not fair.”

He considered an amendment to make the law apply only to legislators, McCormick said, but lawyers told him that it might violate the state and federal constitutions to apply such a law to only one group of residents. Thus, he said, a change in the House rules appears to be a better procedure.

Current rules arguably could be interpreted to prohibit a lawmaker from such dealings, he said, but a change is needed to “make that clear.