High Taxes Lead to Cigarette Black Market

Liberals and other big government types think that by heavily taxing certain things, it’ll serve as a disincentive for people to buy those particular things. Like gasoline. The feds want higher gas taxes to “wean” people off dirty fossil fuels and on to cleaner forms of energy, like mass transit.

Cigarettes are the same way. Politicians want to “do something” about all the smokers out there. How do they get people to stop smoking? They impose heavy taxes on cigarettes, hoping that that will dissuade poorer people from forking over hundreds of dollars per month just to maintain their tobacco habit.

It’s not so much that politicians care about people’s personal habits. It’s more that it’s an easy way for them to rake in tax revenue. They know that nicotine is addictive, and that most smokers will pay whatever the cost is. And in the end, governments rake in the dough. But only if people are buying the heavily taxed products legally.

Perhaps an unintended consequence of these sorts of “sin” taxes is that it encourages a black market. I can’t imagine being able to make much money at all selling untaxed cigarettes in my home state of Georgia. But up in New York, a pack of smokes can cost you $14.50, because the state tobacco tax is $4.35, and New York City’s local tax is $1.60. With taxes like that, they’re pretty much begging for people to resort to creating a cigarette black market.

Here’s Breitbart:

“Smuggled cigarettes have become the new currency of organized crime, and a lot of these criminal organizations are finding that it’s more profitable than illegal narcotics,” Rich Marianos, the retired Assistant Director of the Bureau of Alcohol, Tobacco and Firearms, recently noted.

Marianos said that black market tobacco smuggling has become “a high-profit, low-risk criminal enterprise. Compared to drug offenses where there’s a mandatory minimum sentence, there’s no penalties out there for the cigarette trafficker.”

“They’re being sold in the bodegas, in the convenience stores, they’re being sold on the street, they’re being sold in the housing projects,” Marianos said, “by street gangs like the Latin Kings, terrorist organizations, the Russian Mafia.”

[…]

Last month, the Tax Foundation, in testimony before the US Senate, noted that over 56% of the cigarettes sold in New York State were smuggled in from other states. New York has the highest tax on cigarettes in the country. 

Many smokers are avoiding these higher taxes, though. They are simply buying their smokes, usually unwittingly, from criminal syndicates. 

Needless to say, taxes like these are only for the benefit of governments, so that they can waste tax money any way they want. If they don’t want cigarette black markets to abound, they shouldn’t tax cigarettes at all.