As an African-American tax attorney, I have been closely watching the recent events around police interactions with the black community that have gripped the nation and monopolized the 24-hour news cycle for the last few weeks. Protests, riots, charges of police brutality, die-ins, and chants of "Black lives matter!" and "I can't breathe!" have become unfortunate themes in the closing weeks of 2014. These recent events are even more shocking considering that only six years ago the country elected the first black president in the hope that we as a nation had overcome many of the prior injustices and were moving forward to a more inclusive, "post-racial" America.
Discussing the issues of race, poverty and policing in black communities after the failure of the grand jury in New York to indict the police officer in the death of Eric Garner is an important and necessary conversation. I also believe that we must look at the whole of the situation through more than just a lens of race. My career as a tax attorney informs my opinion and feelings on the cause and effects of the recent circumstances, particularly in the case of Eric Garner. The impact of local tax policy can't be ignored when evaluating why Eric Garner died on a sidewalk in New York City while being arrested by six NYPD officers.
While tax policy may not be an obvious theme in the discussion of most race and policing issues, it is a significant contributing factor in Eric Garner's death on that summer day. If not for New York City's punitive tax policy on the sale of cigarettes, and the related retributory policing policy, Eric Garner would more than likely be alive today. The old adage of "death and taxes" wasn't supposed to be taken as literal tax-enforcement policy.
The public discourse related to taxes usually focuses on the fear of the April 15 due date or the need to raise or lower taxes on large corporations and the rich. In my practice as a tax attorney in Philadelphia, I see every day the lack of recognition by citizens that how people earn their money, how much of the money they keep and their quality of life are heavily influenced by tax policy and regulations. This is especially the case with small-business owners and would-be entrepreneurs, as local municipalities are using any means necessary to make up for lost tax revenue and a decrease in federal aid. Local governments have gotten creative by raising taxes and fees on cigarettes, sugary drinks, gambling, business licenses and other required fees.
While many of these tax assessments are often popular with the public because of the belief that the money raised will provide services for the poorer communities, many times their negative impact on these same communities outweighs the supposed benefit.
There is no debate about the fact that Eric Garner had previous run-ins with the law, including multiple arrests for the possession and sale of untaxed cigarettes in the prior year, including three that were pending at the time of his death, according to the New York Daily News. The sale of "loosies," the selling of individual cigarettes to people who can't afford the price of a full pack, is considered a black-market activity because the seller of the cigarettes does not pay the state and local taxes, which equate to an additional $5.85 per pack in New York City. Compare this with a state like Virginia, which has an average total price per pack of $5.25, less than the taxes alone on a pack of cigarettes in New York City, which has an average total cost per pack of over $12.50.
If the dollar amount of the tax doesn't raise eyebrows, the enforcement policy should. Unlike most local tax enforcement, which is usually done through civil means, there were directives from the highest offices in the NYPD and even the governor's office to criminally enforce cigarette tax evasion through the creation of a "Strike Force." This terminology, from Gov. Cuomo's own press release from March 31, 2014, adequately described the enforcement actions of Officer Panteleo and the other officers that day. When did the collection of taxes, which is primarily a civil matter, require a takedown by police that one would expect for a drug dealer? It also raises the question of why such force is necessary for untaxed cigarettes when Mayor Bill de Blasio recently announced that possession of some amounts of marijuana won't lead to an arrest but merely a summons. How can an illegal product have lesser consequences than a legal one? The answer is taxes. The numerous arrests at the behest of politicians and police command in essence acted as a form of debtor's prison for Mr. Garner.
These imbalanced policies related to consumer-based taxes, often referred to as "sin taxes," should more aptly be described as "shame taxes." I am not a smoker, nor do I think it's good for your health, but as someone who grew up in poverty, I learned not to judge too harshly the people who are trying to make it through sometimes really difficult lives. If they want to take advantage of a legal product, it is their right to do so.
With aggressive criminalization around the enforcement of local tax policy, the city and state of New York have inadvertently created a system of prohibition by taxes, punishing those from poorer communities who wish to partake in legal activities. The inadvertent consequences of these tax policies is that it is making legal products inaccessible to lower-income and working-class Americans, thus creating a black market that didn't previously exist.
While race has been the primary point of focus, the economics can't be ignored. The role of tax policy and the harsh enforcement of regulations in the unnecessary death of Eric Garner can't be overstated. The City of New York caused the unwanted selling of illegal cigarettes by its excessive taxation policy. How can a poor person afford $12.50 a pack for cigarettes? The answer is they can't, so they go around the system, which is what happened in this case. Sometimes cities get tax law and enforcement wrong, like I believe they did in this case. This cigarette tax was excessive, and the collection methods turned out to be deadly.
While the case of local taxes and regulations playing a role in a man's death may be an extreme example, these policies are affecting many others in these municipalities. This environment is also creating difficulty for many who want to start their own small business and achieve their own American dream. How can an entrepreneur who wants to start a small business do so with expensive licenses and complicated regulations that need a skilled and expensive attorney to navigate? If Mr. Garner had desired to start a business to provide for his family instead of selling cigarettes on the sidewalk, would he have been able to? With small business being the primary driver of economic growth we must be wary of the pendulum swinging too far in the effort to raise tax revenues while creating unnecessary road blocks to growth.
There generally tends to be only a few ways out of poverty: (1) getting a good education, which we all know is challenging especially in poorer communities; (2) getting a good job, which is difficult without the proper skills; and/or (3) starting your own business. We talk about wanting to improve the conditions in the black community, and entrepreneurship can play a significant role in this effort, but inadvertently making it too expensive and complicated to do so, especially in places like New York City, only serves to hinder many individuals' ability to be self-reliant. Many with criminal records are unable to find employment due to their history, and starting a business is the only way to earn legitimate earnings.
I spent several years of my career as a tax attorney for the City of Philadelphia, so I understand the importance of tax dollars needed to provide services, jobs and resources to a city. However, this need has to be balanced with encouraging entrepreneurs to create jobs, opportunities for personal growth and the ability to be build a life one can be proud of that allows citizens to be self-reliant.
The protests in light of recent incidents are understandable, but I think all Americans should also be protesting with the mantra "Hands up, don't tax!" Our policy makers should reverse the unintended erosion of opportunity caused by these policies and make sure that no more fathers have to die for not paying a tax.