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Alas, making tobacco nearly as illegal and expensive as a Schedule I drug doesn’t just result in impressive public health gains – there are social costs as well. According to one recent study, New York City smokers with an annual income of less than $30,000 now spend 23.6 percent of that income on cigarettes! That’s more than double the amount they were spending ten years ago, and yet smoking rates of the city’s lowest-income residents have only declined a few percentage points in that time.
Meanwhile, in an effort to subvert New York City’s alleged expansion of liberty, smokers have adopted numerous methods for getting cigarettes more cheaply. Nearby Indian reservations do a brisk trade selling tax-free cigarettes. Roll-your-own shops, which weren’t subject to the same taxes as packaged cigarettes until new federal legislation was enacted last year, offered another alternative. And thousands of shops in New York City simply sell smuggled cigarettes. According to the city’s Finance Commissioner David Frankel, 46 percent of the 1,900 retailers that were inspected over the last 18 months were “selling unstamped or untaxed product.”
Here we see choice architecture at work in insidious fashion: By making a legal but unhealthy product increasingly unaffordable, Mayor Bloomberg and his confederates have effectively nudged thousands of smokers and shopkeepers into criminal behavior. Now, he wants to raise the stakes by increasing the penalties for the behaviors he’s induced. A second new piece of legislation he’s initiating, the “Sensible Tobacco Enforcement” bill, will, if passed, increase financial penalties for selling untaxed cigarettes and give the Department of Finance the power to shut down repeat violators. Light up and inhale the cool liberating flavor of Prohibition Lite.