Charles Gibson, a Norfolk city revenue agent, won't soon forget how he spent last Christmas Day - nor will the man who ran a small groceery store in Gibson's nieghborhood.
Out to pick up a carton of eggnog mix, Gibson noticed something strange about the cigarettes on display at the store's checkout counter. Lifting up a pack, Gibson discovered that the cigarettes didn't have either Norfolk's or Virginia's tax stamps.
Within minutes, Gibson had arrested the owner of the store and confiscated 50 cartons of cigarettes and approximately 300 more loose cigarette packages. Brought to trial later on two misdeameanor charges, possession and sales of untaxed cigarettes, the store owner was fined $200 and court costs.
To Gibson and a growing number of local revenue officials throughout Virginia, the incident is but the latest example of a major problem that is almost certain to confront the next session of the General Assembly. Cigarette bootlegging has become a massive operation in the state, but the odds are, some legislators say, that the legislature will do nothing about it.
To know why is to understand how the 140 legislators work - some skeptics would say don't work - when the Assembly convenes in Richmond each January. The bootlegging problem that confronts people like Gibson is, according to legislators, a monument to the power of the state's tobacco lobby.
Fiercely dedicated to the proposition that any tax on tobacco is a bad tax, the lobbyists import tobacco workers by the busloads, tobacco growers from Southside Virginia and then literally smoke out pro-tax advocates in meeting of the House Finance Committee. To representatives of the tobacco-growing counties, an assignment to that committee, which passes on all revenue measures, is more sought after than an assignment to the House Agriculture Committee.
The result is that Virginai's 2.5 cents-a-pack cigarette tax is the second lowest in the nation (Only North Carolina, which produces most of the nation's cigarettes, has a lower rate, two cents a pack.)
Twenty-one Virginia localities also impose cigarette taxes adding as much as 10 cents a pack in cities like Norjolk, Richmond, the home of several national cigarette broands, and many rural tobacco-producing counties have no local tax at all.
Efforts to boost either the state or local taxes are usually met by unwaivering opposition in the fiance committee. If cigarette smuggling is a problem, it is only because others states have taxed tobacco too heavily; not that Virginia has taxed tobacco lightly, the committee members say.
Gov. Mills E. Godwin has likened the prospects for doomed legislation to that of getting "a tobacco tax (bill) out of the House Finance Committee."
Now, that reluctance is coming under attack from a new source. In a recently released 115-page report, the prestigious U.S. Advisory Commission on Intergovernment Relations has, in effect, warned low-tax states like Virginia that they may be unwittingly entering a partnership with organized crime.
There is no dispute, the report says, that "organized crime has become heavily involved in bootlegging . . . becuase of the high profit potential" created by low-tax states. In neighboring North Carolina, there is already "some evidence" that organized crime has begun buying wholesale tobacco companies, the report says.
The report contains few specifics on the extent of cigarette smuggling in Virginia, but it classes the state as one of eight that currently receive "substantial benefits" from smuggling. In one year Virginia probably gains $2,5 million in tax revenues on cigarettes that will be bootlegged to the North-east and sold illegally, the report says.
That may be overstating the case. The commission's work does not consider the impact of bootlegeggin on the 21 localities across the state that impose an additional tobacco tax of their own on cigarette.
Nor does it consider the potential for intrastate smuggling between Virginia localities, a condition that the commission's own figures say can happen wherever there is a 10 cent-a-pack range in tobacco tax rates.
Norfolk's Gibson says smuggling from other parts of Virginia into Norfolk does exist, but he says it isn't as serious a problem as the flow of cigarettes from North Carolina and the area's military bases, where no taxes at all are imposed. Norfolk alone figures it lost at least $500,000 in taxes during the past fiscal year to smuggling, GIbson said.
In Northern Virginia, where most cigarettes are taxed at five cents a pack - half the Norfolk rate - North Carolina is believed to be the principal source of bootlegged cigarettes, according to John Weaver, a tobacco revenue agent for the Northern Virginia Cigarette Tax Board.
"We don't see a lot of it, but we know it is definitely around," says Weaver, an agent for the Tax Board, which is the regional agency that collects tobacco taxes for eight Washington suburbs. Northern Virginia authorities don't know for sure how much smuggling is going on there because the tax agency has little enforcement power, he says.
"We're more an auditing agency," he says, almost apologetically. Unlike Norfolk, the Washington suburbs depend more on audits of tobacco wholesalers and retailers than agents and informants to lead them to cigarette smugglers.
A subcommittee of the House Finance Committee is looking into the question, but the subcommittee head, Del. Bernard G. Barrow (D-Virginia Beach), is not optimistic about the prospects. The key to getting any higher tobacco tax in Virginia, he says, would be unilaterial action by the high-tax states to cut their rates. Even then, Barrow acknowledges that the odds would favor only a "modest" increase above the 2.5 cent-a-pack rate.
Since the highest tax of all, 23 cents a pack, comes in New York City, odds for a tax decrease in that financially troubled city are remote, most members of the legislature would agree. (The District of Columbia currently imposes a 13-cent tax and Maryland, ten cents, according to the report.)
What troubles Barrow is not only the bootlegging, but the costly administration and disparities in the tobacco tax across the state. He proposed legislation last year that would have set a uniform state tax, wiped out local taxes and prevented any locality from suffering a tax loss as a consequence of the bill.
The bill never made it out of committee, thanks to tobacco lobby opposition. Barrow settled for the subcommittee as a compromise, hoping that if the tobacco-area legislators got a first-hand look at the problems, they would be more sympathetic to his proposal next year.
Despite the federal study and the testimony of men like Gibson, Barrow does not see Virginia's legislators as being ready to kick the habit. "Tobacco is such an emotional issue," he said the other day. "And . . . the tobacco interests see Virginia as an important symbol . . . They fear that if Virginia passes a higher cigarette sales tax, it will create a domino effect that will ripple across the country."