Crime fighter Paul J. Curran has come up with a noval proposal to drive the Mafia out of cigarette bootlegging in New York: Cut state taxes so much that the Mob would no longer find the business attractive.
Curran, currently heading the investigation of $7 million in loans to the Carter family peanut warehouse, told a news conference that about half the cigarettes sold in New York City are bootlegged from states such as North Carolina.
North Carolina imposes a tax of two cents a pack on cigarettes and does not require that a tax stamp be affixed to each pack. New York has a 15-cent state tax and an eight-cent city tax on each pack.
Curran said that 21-cent difference makes it profitable for mobsters to buy cigarettes in North Carolina, ship them to New York and sell them to retailers in the city for 30 to 40 cents a carton less than legitimate New York wholesalers.
He said that if the eight-cent city tax were eliminated and the state tax reduced by a penny to 14 cents, organized crime would not find it economically attractive to bootleg cigarettes in New York.
Bootleg cigarettes are a problem not only in New York but in all states that impose high excise taxes on the tobacco product, such as Pennsylvania and Illinois.
Curran, who was named special prosecutor to investigate the Carter family warehouse last March, flew from Atlanta at his own expense to appear at a press conference called by the Wholesale Tobacco Distributors of New York.
George Elicofon, head of the distributors, said half a dozen wholesalers have gone out of business in the past six months because they could not compete with the prices offered by mobsters.
Another major wholesaler, J. Rosenberg and Sons, is on the verge of bankruptcy and another half dozen could go out of business in the next six months, Elicofon said.
Elicofon said that a tobacco wholesaler had not gone out of business for 20 years until the recent spate of bankruptcies began early this year.
Curran, who as head of New York's State Commission of Investigation in 1972, documented the increasing role of organized crime in cigarette bootlegging, called on Gov. Hugh L. Carey and the state legislature to reduce cigarette taxes immediately.
In 1976, a special state task force appointed by Carey's tax commissioner James H. Tully Jr., recommended the nine cent reduction in cigarette taxes urged by Curran.
Curran said that studies have shown that if the tax was reduced to 15 cents, the higher volume of legal cigarette sales would generate the same, or slightly more, tax revenues than the city and state collect today.
"Organized crime doesn't go into any business to lose money," Curran said. "They have costs too." With a 15-cent tax instead of a 23-cent tax, organized crime would no longer find it profitable to bootleg cigarettes.
Curran said the profits from bootlegging are "a major and growing source of capital for organized crime. This means that the money paid by New Yorkers for bootleg cigarettes are used to finance the narcotics traffic, loan-sharking, corruption of public officials, labor racketeering, prostitution, securities and other frauds, and countless other crimes."
About 2 billion packs of cigarettes are sold each year in New York State and officials estimate between 400 million and 600 million are bootlegged. In the city, legal tax stamps were affixed to 780 million packs last year.
In the late 1960s, before taxes jumped sharply, the city recorded more than 1.2 billion taxed packs.
Curran said organized crime took over from amateur bootleggers in the late 1960s after city and state taxes began to climb charply.
Last year the state collected $330 million in cigarette taxes and the city collected $60 million.
There are hundreds of "discount cigarette" shops that dot Manhattan and other boroughs of New York City. Many sell illegal cigarettes.
The retailer who sells cigarettes that are bootlegged must also get some his cigarettes from a legitimate wholesaler. Elicofon, of the tobacco distributors, said the sellers of the bootlegged cigarettes counterfeit the tax stamps of the legitimate wholesaler and apply it to the illegal cigarettes supplies the retailer.