NARCOTICS AND THE WAR IN SOUTHEAST ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP74B00415R000300230054-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 16, 2016
• Document Release Date: January 4, 2005
• Sequence Number: 54
• Publication Date: July 26, 1972
• Content Type: OPEN

S 11840
Approved For Rel iq' & A1PR1 el3004~lL Rf W00230054-1 July 26, 1972
in proposed ("revenue shifting") has been
adapted from the system now in effect in
Canada for the division of personal income
tax collections between the Dominion and
the provincial governments. It involves a
substitution of a sharing of the Federal per-
sonal income tax base and collection facil-
ities for a sharing of the Federal govern-
ment's revenues. Its effect is to shift to the
states a portion of the personal income taxes
now collected by the Federal government.
The revenue shifting concept, which can
accomplish the main objectives of the Ad-
ministration's proposal while avoiding its
weaknesses, requires legislation which will
(1) effect an across-the-board reduction
in Federal personal income tax rates of "X"
per cent, "X" being the percentage required
to reduce estimated collections for Federal
use by the amount of the revenue which is.
to be shifted to the states;
(2) direct the Internal Revenue Service to
collect on behalf of each state from its resi-
dents an additional amount equivalent to
"Y" per cent of the Federal tax collection,
"Y" being the percentage required to equal
the amount of revenue to be shifted to the
states.
(3) authorize each state to direct the IRS
to reduce, increase or eliminate the amount
of the state share to be collected on its be-
half;
(4) require that tax returns for the Fed-
eral and state tax collections be made on a
single or joint form in which it is clearly
indicated which portion of an individual's
tax is being raised on behalf of the Federal
government d behalf of the
an which on e
state.
D. Illustration of "Revenue Shifting"
Mechanics: The
The overall objective of the Administra-
tion's proposal is to increase state and local
revenues by $6 billion without increasing
the existing burden on taxpayers. The rev-
enue shifting proposal can achieve this ob-
on the Tax Foundation's estimate that the
Federal government will collect $93.7 billion
in personal income taxes in FY 1972.
jective in the manner described below, based income tax collections to $88.7 billion na-
1. Federal personal income tax rates are
reduced by 5.34 per cent thereby. reducing
the personal income tax yield by $5 billion.
This will reduce the total Federal personal
2. In addition to the personal income taxes
tionally. which it is to collect for the federal govern-
of each state (unless such state otherwise
ment, the IRS is directed to collect on behalf the aggregate would result in the distribu-
directs) an additional increment which in
illustration, this would mean that IRS would
collect an increment of 5.6 per cent above the
tion to the states of ffib billion. Based on this otherwise, the collection of this 5,6 per cent
amount collected on behalf of the Federal
government.
3. Assuming no state specifically directs
increment above the personal income taxes Federal government would result in a dis-
collected by the. IRS for the purposes of the
tribution to the states of $5 billion.
4. Under this proposal, an individual state
would be able to authorize the IRS to collect
more or less than the 5.6 per cent increment
from its residents. Thus a state which elected
not to have IRS collect any taxes on its be-
half could, in effect, provide a 5.34 per cent
tax out for its residents. On the other hand,
another state which is particularly hard
pressed for revenue could elect to authorize
the IRS to collect more than the increment
as an alternative to increasing its sales tax,
forexample.
E. Advantages of the "Revenue Shifting"
Alternative:
1. Because the states have the power to
thority over the taxation of their citizens
for state and local needs. No precedent is
set for Federal "ball-outs" for states which
may have overextended themselves."
2. Because the personal income tax form
filed with the Internal Revenue Service will
specify how much of the tax Is being collected
for the Federal government and how much
for the state, the taxpayer is spared the illu-
sion that money transferred by IRS to his
state is somehow Washington's money and
not his money.
3. The states are enabled to share to a
greater extent in what has been the Federal
government's personal income tax base; and,
in addition, they are provided with the con-
venience and economy of utilizing the exist-
ing Federal tax collection machinery.
4. The revenue shifting proposal avoids
making the states dependent on the Federal
government for another substantial source
of income, and therefore avoids the danger
of ultimate Federal dictation. Once the plan
is in operation, its cost to the Federal gov-
ernment will be negligible, amounting as it
will to just the cost of transferring to each
state the amount collected on its behalf.
Thus the system, once established, would not
be endangered by, future Congressional
economies.
5. It eliminates the invisible subsidies
which, under the Revenue Sharing proposals,
are paid to some, often "low tax effort"
states at the expense of the more urban, In-
dustrialized states which are currently ex-
periencing the most critical need for funds.
g
g
coun
er
ng
e?
rug pro
em
in their respective countries." That i
jNARCOTICS AND THE WAR IN
what he wrote.
SOUTHEAST ASIA
INTERNAL MEMO DENIES PUBLIC OPTIMISM
PROXMIRE. Mr. President, there
The administration's public optimism
are many many reasons why the United
does not square with their nonpublic as
States should get out of Vietnam. First
sessments. Seymour Hersh pointed ou
in a New York Times article on July 24
1972 that the administration is quite pes-
far more than $100 billion, there is noth-
simistic about controlling drug produc-
ing to be gained from further aid to the
tion and distribution from these coun-
South Vietnamese. If they are unable to
tries. Mr. Hersh quoted a February 21
fight for themselves now, they never will
1972 report prepared by the Central In-
be able to do so.
telligence Agency, the State Department
But there is now a further and more
and the Defense Department as saying
urgent reason. Thousands of American
that narcotics control was unlikely "be-
cause the governments in the region are
while fighting there. Furthermore, key
unable and, in some cases, unwilling to
regions in Southeast Asia are now the
do those things that would have to be
done by them if a truly effective effort
coming into the United States.
were to be made." Hersh also reported
Just as Congress has been told year
that the document says that the basic
problem results from "corruption, collu-
each day we see how weak and helpless
sion, and indifference at some places in
our allies are without our military pro-
some governments, particularly Thailand
tection so we have also been told that
and South Vietnam,"
the battle against drugs has the active
Paradoxically, the administration has
and sincere cooperation of our Southeast
tried to publicly discredit and contradict
Asian allies. But it now appears from the
similar charges when they were presented
evidence presented to my Subcommittee
to my subcommittee by Mr. Alfred Mc-
on Foreign Operations and from a series
Coy. They failed to reveal a similar con-
clusion reached by their own agencies.
Seymour Hersh, that our allies in South-
Why is there such a difference be-
east Asia are harboring a major and
tween the administration's public story,
growing source of drugs which addict our
on the one hand, and the administra-
servicemen and which are sold to our
tion's internal reports, on the other? It
youth at home. I believe that the drug
certainly appears to be true that control
problem- alone is sufficient reason to get
of narcotics in Southeast Asia has taken
out of the war and out of Southeast Asia.
a backseat to the administration's war
And now is the time to do it. The war in
policy.
Southeast Asia is not worth a single drug
WAR POLICIES NOT WORTH SUFFERING AND
addicted American.
BROKEN LIVES
Critics of our involvement in South-
east Asia have often
ointed to the ad- Mr. President, I must reject this kind
p
verse domestic consequences of our mili- of policy and I shudder at the suffering
tary
activities there. Our economy con- and broken lives it has brought about.
direct IRS to increase, redu a or a~nn~Iate tinues to suffer from the infl
1 ~r W v ate as 560,000 young
the amount to iAppDlt?i'stednFtori*iei88Seb2d10dd27y: t ARDP~s~ 1~ OU te addicted to heroin,
they retain full responsibility for and au- grams for housing, health care, urban and as many as 100,000 addicted veter-
renewal, rural regeneration, and envi-
ronmental protection are postponed. Re-
forms in our welfare system, our tax
structure, and our system of revenue dis-
tribution are sacrificed on the altar of
foreign military priorities.
But Mr. President, to me the most
bitter consequence of this war is the
cruel and callous way in which the inter-
ests of our own people are disregarded.
The evidence has been mounting over
the last 2 or 3 years that a major cause
of our drug problem has its foundation
in and has been exacerbated by the war
in Vietnam.
ISSUE RAISED WITH SECRETARY ROGERS
When I have raised this issue with
Secretary of State Rogers and other ad-
ministration spokesmen as chairman of
the Foreign Operations Subcommittee,
they have assured me that the Govern-
ments of Thailand, Laos, and South Viet-
nam are cooperating fully in the battle
against international drug traffickers.
Nelson Gross, senior advisor to? the Secre-
tary of State and coordinator for inter-
national narcotics matters, in a letter to
me claimed that the "Governments of
Southeast Asia are not engaged in drug
trafficking. Indeed, the Governments
of Laos, Thailand, and Vietnam have
committed themselves and are actively
en
a
ed in
t
i
th
d
bl
s
-
t
,
,
,
 July 26, 197_Approved For & ~,7L: Jjp$74B 1$1 i 00300230054-1
ans who are now or will be flooding our
woefully inadequate treatment and re-
habilitation facilities. How can we pos-
sibly condone the continued poisoning of
our youth in the name of military priori-
ties? How can we tell mothers and fath-
ers that their children's lives have been
hopelessly ruined because the Vietnam
war has had a far higher priority than
control of narcotics? Have Americans
become so hardened by years of death
and destruction that they will even tol-
erate the flow of narcotics because it
might displease our allies? I hope and
pray that the answer is no.
Nothing should be more important
than preventing dangerous drugs from
falling into the hands of our children.
President Nixon proclaimed, a little more
than 1 year ago, that drug abuse was our
No. 1 domestic problem. I call for a
genuine commitment by the Nixon ad-
ministration to ending narcotics pro-
duction and traffic in Thailand, Laos, and
South Vietnam. The sensitivity of these
alleged allies is not worth a broken life.
What heroin is doing to this country is
far more serious than any military dan-
ger we face in Southeast Asia. It is time
that we make the drug traffic our No. 1
foreign policy priority.
Mr. President, I ask unanimous con-
sent to insert the article by Seymour
Hersh in the RECORD at this point as part
of my remarks.
There being no objection, the article
was ordered to be printed in the REC-
ORD, as follows:
REPORT TO UNITED STATES SEES No HOPE OF
HALTING AS.AN DRUG TRAFFIC
(By Seymour M. Hersh)
WASHINGTON, July 23.--A Cabinet-level re-
port has concluded that, contrary to the
Nixon Administration's public optimism,
"there is no prospect" of stemming the smug-
gling of narcotics by air and sea in South-
east Asia "under any conditions that can.
realistically be projected."
"This is so," the report, dated Feb. 21,
1972, said, "because the governments in the
region are unable and, in some cases, un-
willing to do those things that would have
to be done by them if a truly effective effort
were to be made."
The report prepared by officials of the Cen-
tral Intelligence Agency, the State Depart-
ment and the Defense Department noted
that "the most basic problem, and the one
that unfortunately appears least likely to
any early solution, is the corruption, col-
lusion and indifference at some places in
some governments, particularly Thailand and
South Vietnam, that precludes more effective
suppression of traffic by the governments on
whose territory it takes place."
The report sharply contradicted the offi-
cial Administration position and Govern-
ment intelligence sources say its conclusions
are still valid today. In May, Secretary of
State William P. Rogers told a Senate sub-
committee that "we think all the countries
are cooperating with us and we are quite
satisfied with that cooperation."
Similarly, Nelson G. Gross, Senior Ad-
viser to the secretary of State and coordi-
nator for International Narcotics Matters,
testified before Congress in June on the sub-
ject of narcotics smuggling that "the gov-
ernments of Thailand, Laos and Vietnam
have already joined us in the fight and,
while we have a long way to go, we feel that
during the past year some real progress has
been achieved."
agencies, under personal prodding from
President Nixon, have begun an intensive ef-
fort to stem the international narcotics traf-
fic. But critics contend that the effort is
far less effective today than Administration
officials say it is.
CRITICS' CHARGES BACKED
Two leading critics of what they allege
to be the Government's laxness in stopping
the flow of narcatics are Representative
Robert H. Steele, Republican of Connecticut,
and Alfred W. McCoy, a 26-year-old Yale
graduate student who has written a book
on narcotics in Southeast Asia. The New
York Times reported Saturday that Mr. Mc-
Coy's allegations concerning the C.I.A. and
the drug traffic had been the subject of an
intense and unusually public rebuttal by
the agency.
The Cabinet-level report, made available
to The Times, buttressed many of the charges
made by the two critics, particularly about
the pivotal importance of Thailand to the
international drug smugglers. Thailand is
also a major Air Force staking area.
STEELE HINTED AT PAYOFFS
In a report on the world heroin problem
last year, Mr. Steele wrote that "from the
American viewpoint, Thailand is as impor-
tant to the control of the illegal internation-
al traffic in narcotics as Turkey. While all of
the opium produced in Southeast Asia is
not grown in Thailand, most of it is smug-
gled through that country."
Mr. Steele's report, filed with the House
Committee on Foreign Affairs, noted that
many American citizens had established
residence in Bangkok, and had moved into
the narcotics trade. The report added that
the inability of the United States to have a
few notorious States to have a few smug-
glers deported had led some intelligence of-
floials to co, clude that the men were paying
Thai officials for protection.
Mr. McCoy said in testimony before Con-
gressional committees last month that hun-
dreds of tons of Burmese opium passed
through Thailand every year to international
markets in Europe and the United States
and that 80 to 90 per-cent of the opium was
carried by Chinese Nationalist paramilitary
teams that were at one time paid by the
C.I.A.
There are a number of opium refineries
along the northern Thai border, he said, and
much of the processed high-quality heroin
is shipped by trawler to Hong Kong.
THAI-U.S. AGREEMENTS CITED
"Even though they are heavily involved
in the narcotics traffic," Mr. McCoy testified,
"these Nationalist Chinese irregulars units
are closely allied with the Thai Government."
He said that Thai Government police units
patrol the northern border area and collect
an "import duty" of about $2.50 a pound of
raw opium entering Thailand. All this activ-
ity, he said, is monitored by United States
intelligence agencies.
Mr. Gross, the State Department's adviser
on international narcotics, said in his Con-
gressional testimony that "During the past
year the Thais have increased their efforts
in the drug field with United States and
United Nation's Assistance." He cited two
agreements, signed in late 1971, calling for
more cooperation and more long-range
planning between That and United States
officials to stamp out the trade.
"Based on all intelligence information
available," Mr. Gross testified, "the leaders
of the Thai Government are not engaged in
the opium or heroin traffic, nor are they ex-
tending protection to traffickers." He added
that the top police official in Thailand had
publicly stated that he would punish any
S 11841
cotics Control, asked "highest priority" for
suppression of the traffic by Thai trawlers,
noting that each trawler "would represent
something like 6 per cent of annual United
States consumption of heroin."
The report said that the trawler traffic
should have priority because "it is possible
to attack the Thai trawler traffic without
seeking the cooperation of That authorities
and running the attendant risk of leaks,
tip-offs and betrayals."
After such a seizure, the report said, the
United States Embassy in Bangkok could "re-
peat with still greater force and insistence
the representations it has already often made
to the Government of Thailand" for more
effective efforts "to interdict traffic from the
north of Thailand to Bangkok and also the
loading of narcotics on ships in That
harbors."
At another point in the report, a general
complaint was voiced. "It should surely be
possible to convey to the right Thai or Viet-
namese officials the mood of the Congress and
the Administration on the subject of drugs,"
the report said. "No real progress can be made
on the problem of illicit traffic until and
unless the local governments concerned make
it a matter of highest priority."
Representatives Steele, Lester L. Wolff,
Democrat of Nassau County, and Morgan F.
Murphy, Democrat of Illinois, have sponsored
legislation that would cut off more than
$100-million in foreign aid to Thailand un-
less she took more action to halt the produc-
tion and traffic of heroin. Their measure
cleared the House Foreign Affairs Commit-
tee on June 21 and is Included in the Foreign
Assistance Act, now pendin?. 1
THE TROUBLED AEROSPACE
INDUSTRY
Mr. ROTH. Mr. President, many sec-
tors of American industry face severe
problems which must be met in the
1970's: Production costs continue to rise
while highly dedicated and technologi-
cally advanced foreign competition
squeezes on traditional U.S. markets.
Perhaps one of the most troubled of
all is the U.S. aerospace industry; the
problems which they face are unique be-
cause of their heavy dependence on Gov-
ernment funds to sustain them. Over
managed and over facilitized, these large
corporations, which burgeoned in the
1960's, face a problem in trimming down
to meet reduced military spending and
reduced airplane orders by airline cus-
tomers, as well as - finding some way to
reduce the costs of their products.
The aerospace industry is the backbone
of our national security and must be kept
strong. But, in this case strength does
not derive from size, but from the quality
of technology which can be brought to
bear, and the efficiency with which a
product can be produced. The rapid
buildup of the industry in the 1960's
caused the dilution of managerial and
technological excellence, the results of
which have been graphically demon-
strated by a myriad of program cost over-
runs caused by less than excellent man-
agement.
The legacy of overcapacity of the in-
dustry was the subject of some concern
during the debate over the Lockheed loan
guarantee. It seemed apparent at that
time that the market would not profit-
ably support three domestic roducers of
All officials concerned with the r]ug pr The,~p}~~~~y y eppr s ~g~p ~,a~ kneed had placed
lem acknowledge tlA $'Ov et['09`t ~ea~il~il.Ve i 11 lro lf+ k Io I ?1 1 `~4~ o irious position that