Lawmaker: Tobacco Smuggling Nets Terrorist Groups Millions

Terrorist organizations abroad are collecting millions of dollars from tobacco smuggling rings in America, according to a report released yesterday by Rep. Peter King of Long Island.

The report, which draws on interviews with state and federal law enforcement agents, details how tax exemptions for American Indian reservations and differences in cigarette taxes among states are producing a profitable smuggling industry nationwide.

New York state and New York City have the highest cigarette taxes in the country, after a $1.25 increase in the most recent state budget. Cigarettes are taxed at $2.75 a pack in the state and $4.25 in the city, creating a strong incentive for customers, retailers, and smugglers to seek untaxed or undertaxed tobacco.

According to Mr. King, money from these smuggling operations, which can generate as much as $300,000 a week in profits, are sometimes funneled to terrorist organizations overseas, either through tobacco vendors or through the smugglers themselves.

"Hamas and Hezbollah have a fairly extensive fund-raising apparatus in this country," Mr. King said yesterday in a telephone interview. "There is no evidence they are directing themselves against us as a country; they are now primarily content with sending money for operations overseas and they have that mechanism in place."

Mr. King, a Republican, is recommending that New York state enforce its statewide cigarette tax on American Indian reservations that are presently exempt from the levies in order to disrupt smuggling operations that rely on the discrepancy.

"There's no magic answer that solves it across the board, but the more difficult you make it for smugglers the better," he said. "It has to be a multipronged attack, but the largest target would be the Indian reservations."

Governor Paterson is said to be considering taxing the reservations as a means to help balance the budget, a move that could bring in as much as $800 million annually in tax revenue.