Pubdate: Thu, 31 Mar 2005
Source: Sun Herald (MS)
Copyright: 2005, The Sun Herald
Contact:  http://www.sunherald.com
Details: http://www.mapinc.org/media/432
Author: Bill Minor

BLACK-MARKET TAX TRIES FOR A COMEBACK

Holy deja vu all over again! Mississippi's black market tax scheme
still lives in the Legislature after being buried for 40 years!

Last week Mississippi House members by a better than a two-thirds
margin voted for a resolution to slap a tax on the possession of
illegal drugs - cocaine and such.

Sound cockamamie? Well House members who pushed the idea and got 84
votes (after one brief failure) said three other states already have
such a law, and it's bringing in between $10 million and $25 million a
year.

You might describe the House proposal as a 21st century version of the
state's old black-market tax on illegal booze, which ended when the
Legislature repealed state prohibition in 1966.

As this was written, there had been no movement by the Senate to
suspend the deadline on new bills at the current legislative session
so the proposed bill to tax illicit drugs can be considered.

Even if nothing comes of this novel idea to get cash from hash, it
points up how desperate the search for revenue to fund the FY2006
budget has become up at the Legislature.

Most lawmakers around now probably had never even heard of the state's
famous - or infamous - "black-market" tax on illegal liquor that we
collected back in the days of statewide Prohibition.

Until 1966, the sale of all distilled alcohol except 4 percent beer
was illegal in the eyes of the state's dry laws.

However, folks could legally buy Hadacol, a "youth-restoring" tonic,
or Dr. Tichenor's antiseptic, for everything from mosquito bites to
throat gargle, each almost 70 percent alcohol.

Despite statewide prohibition, which had been enacted in 1908,
thousands of federally bonded cases of liquor were known to be sold in
at least two dozen counties, often openly in package stores and bars
on the Gulf Coast and in Mississippi River towns.

In 1944, at the height of World War II when the term "black market"
was familiar as applied to contraband rubber tires or gasoline sold
outside government rationing, lawmakers enacted a 10 percent
black-market tax on contraband goods.

Shrewd old legislators knew that the biggest Mississippi contraband
being sold was booze; we're not talking about old-fashioned moonshine
but the federally bonneted variety.

Whiskey became arcanely described in the law as "tangible personal
property, the sale of which is prohibited by law."

Collecting the 10 percent tax was given to the State Tax Collector, an
obscure constitutional office that dated back to the early days of the
state's 1890 Constitution.

With no chance of getting prohibition repealed, legislators figured
the black-market tax on illegal liquor would be a good device to get
some needed revenue out of the liquor trade, and would do it without
stirring up a big ruckus over the perennial wet-dry issue in the state.

The only problem was how to get the big bootleggers who ran most of
the traffic to pony up the tax.

State efforts to collect the 10 percent tax were far from effective
until a 32-year-old Grenada County legislator named William Winter was
appointed in 1956 to fill a vacancy in the State Tax Collector's office.

Winter found out very quickly the great bulk of bottled booze was
being bought through Louisiana liquor wholesalers because that state
collected only a small tax on whiskey and wine exports.

The ex-lawmaker installed a business-like system with the cooperation
of the Louisiana revenue agency to get copies of invoices of booze
shipments from that state destined for Mississippi
wholesalers.

Actually, Winter realized he would have to concentrate on a handful of
big Mississippi bootleggers who imported and warehoused virtually all
the booze coming into the state. They would resell it by the case to
bootleggers who set up shop in bars or package stores wherever they
could get local county or town authorities to let them operate.

Winter dealt only with collecting the tax at the wholesale level,
since that was where the big money was. He billed the wholesalers for
the amount of black-market tax they owed based on the invoices of
shipments he got from Louisiana.

They usually paid up, but his agents, though not law enforcement
people, made regular rounds of the big wholesalers to make sure they
weren't cheating the state.

Within a couple years, the black-market levy was bringing in over $1.5
million a year for the state general fund, a significant revenue sum
in those days.

As the saying went: "The drys had their law; the wets had their
whiskey; and the state got the taxes." A neat setup, but highly
hypocritical, and it made Mississippi a laughingstock.

State law allowed the Tax Collector to keep 10 percent of what he
collected, making Winter, even after he paid expenses, one of nation's
the best-paid state officials. You'd think Winter would be happy with
such a cushy job, but he wasn't. From the time he accepted the
appointment, he advocated abolishing the office and finding a better
way to deal with the liquor trade.

Eventually, state legislators took him up on eliminating the office,
but added a 15 percent sales tax on illegal booze, using the same
system Winter had initially set up to collect it.

The House's proposed tax on illegal drugs, much like the old
black-market liquor tax, wouldn't describe dope as such, only as
"unauthorized substances."

Deja vu anyone?
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MAP posted-by: Larry Seguin