Tag Archives: cigarettes

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.
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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.
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Rep. Joe Armstrong indicted on fraud, tax evasion charges

From the News-Sentinel:
One of Tennessee’s and the nation’s most influential black state legislators bartered his vote on a cigarette tax hike for a cut in a scheme to hoard tax stamps at pre-hike prices and then sell them off once the Tennessee Legislature approved the bill, a federal indictment alleges.

State Rep. Joe Armstrong, D-Knoxville, who served as president of the National Black Caucus of State Legislators from 2012-2014 and twice was named the group’s Legislator of the Year, was indicted Wednesday in U.S. District Court.

Armstrong, 58, is charged in the indictment with conspiracy to defraud the U.S., tax evasion and lying to the IRS. He is expected to surrender to federal authorities Friday morning to be arraigned.

Court records show and Armstrong says in a statement provided by defense attorney Gregory P. Isaacs that he has been under investigation in the tax-stamp fraud case for “several years” — all while casting votes on legislation big and small, serving on the state House’s influential House Finance, Ways and Means Committee, heading the national black caucus and state democratic caucus and racking up prestigious awards.
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Columnist laments legislators mandating bigger cigarette sale profits

From a Jack McElroy column in the News Sentinel:

Among the bills that slipped through the legislative session with little fanfare was Tennessee’s plan to reduce smoking by making it more profitable to sell cigarettes.

Read that sentence again, if you need to. The logic is tough to follow.

Lawmakers could have raised taxes on cigarettes from 62 cents a pack — 12th lowest in the nation. That, however, would have involved a — shudder — tax increase. Instead, the freedom-loving supermajority voted to force stores to raise prices.

It’s a win-windfall solution. Tobacco dealers will earn an extra $129 million a year when the price control is fully implemented.

This was achieved by manipulating the 1950s-era Unfair Cigarette Sales Law. The law was passed when cigarettes were advertised everywhere and a pack cost two bits. To protect small merchants from big stores using cigarettes as loss-leaders, states established minimum markups. In Tennessee, that markup was 8 percent over the retailer’s invoice cost.

There aren’t many small dealers left now. Cigarettes are sold by giant chains. Still, in recent years that 8 percent minimum markup hasn’t seemed like enough, and the retailers began lobbying for more.

…Sadly, minimum markups alone don’t do much to slow tobacco addition. A report by the Tobacco Control Legal Consortium points out that cigarette manufacturers — desperate to keep their hooks in the market — spend lavishly to counteract such price increases with promotional discounts. In 2006, for instance, the industry spent more than $9 billion on discounts.

A few states have addressed that by mandating that discounts can’t be used to offset their “unfair cigarette sales laws.”

Tennessee isn’t one.

Roll-Your-Own Cigarette Tax Hike Approved

NASHVILLE, Tenn. – A bill raising taxes on cigarettes produced in stores equipped with “roll-your-own machines” was approved as one of the last orders of business in Tennessee’s 107th General Assembly.
The measure, SB1738, cleared the Senate on a 26-5 vote Monday and passed the House 68-22 on Tuesday.
The two chambers were at odds, however, on when the higher taxes should take effect and a House-Senate Conference Committee was set up to resolve the difference. The committee’s compromise, Oct. 1, 2013, was approved by the two chambers Tuesday night about 10 minutes before the legislative session ended for the year.
The measure was pushed by lobbyists for tobacco companies and convenience stores who contended the current lower tax rate for “roll-your-own” cigarettes allows machine operators to sell at about half the price of similar packaged cigarettes, making for an unfair advantage.
The measure was opposed by lobbyists retained by manufacturers and by about 70 businesses now operating “roll-your-own” shops, wherein customers buy loose tobacco and papers to make cigarettes on site. They contended the bill amounted to a tax increase on small businesses and, in some cases, could put them out of business.
The delay in effective date was seen as a compromise that will allow those who have invested in the machines to recover some or all of their investment, according to sponsors Rep. Steve McDaniel, R-Parkers Crossroads, and Sen. Jack Johnson, R-Franklin.

Committee Chair’s Email Used by Lobbyist to Oppose Cigarette Bill

A lobbyist’s email was sent under state Rep. Bob Ramsey’s name, using his legislative office computer, to urge that all state representatives vote against a bill on taxing roll-your-own cigarettes, those involved said Tuesday.
The episode Monday led Ramsey, chairman of the House State and Local Government Committee, to send a follow-up message to colleagues saying the email “was sent out from my e-mail account without my knowledge” and “in no way reflects my opinion of the matter.”
It also led House Speaker Beth Harwell to speak with Ramsey, his assistant, Angela Brown, and lobbyist Dan Haskell.
“I heard his (Haskell’s) side of the story,” Harwell said. “I talked to Rep. Ramsey and his assistant and made it clear that legislative equipment and email are for legislative staff and our members only.”

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