President Obama's New Cigarette Tax Will Fuel an Already Booming Black Market in Smokes

CigaretteAssef ElweterDrawing on the old adage, "if you want more of something, subsidize it; if you want less, tax it," politicans around the country have turned to burdensome tariffs on stuff they don't like as a proxy for the hard work of passing formal prohibitions. Booze, tobacco and ammunition have been popular targets of late, But maybe politicans need an annotated version of that adage. As the cigarette market demonstrates, when you wield revenue collection as a tool of social engineering, what you get is less of the legal version of the product that you're trying to tax the hell out of. As outright prohibitionists discovered (but ignored) long ago, savvy black marketeers always stand ready to dodge the law to give people what they want. And among the things people want are smokes at an affordable price. That's an important point to remember just days after the president called for a 94 cent hike in federal cigarette taxes.

Michigan's Mackinac Center for Public Policy surveys the cigarette market every two years to see just how it responds to taxes intended to enforce what it calls "prohibition by price." Then the center's analysts break down, by state, the estimated percentage of the cigarette market served by smugglers who bring in goods from lower-taxed jurisdictions, or even import counterfeit cigarettes from out of the country to the booming market. With the highest cigarette tax in the country, overtly passed to discourage smoking, New York has managed to drive the majority of the cigarette market to smugglers. As the center's Michael D. LaFaive and Todd Nesbit, Ph.D. put it:

We find that New York currently holds the top position as the highest net importer of smuggled cigarettes in 2011, with smuggled cigarettes totaling a staggering 60.9 percent of the total market. Not coincidentally, New York also has the nation’s highest state cigarette tax at $4.35 per pack, plus another $1.50 levied in New York City.

The top ten states in terms of smuggled cigarettes as a percentage of the market for smokes  are:

  1. New York: 60.9
  2. Arizona 54.4
  3. New Mexico: 53
  4. Washington: 48.5
  5. Rhode Island: 39.8
  6. Wisconsin: 36.4
  7. California: 36.1
  8. Texas: 33.8
  9. Utah: 32.0
  10. Michigan: 29.3

Cigarette smuggling is lucrative. Mike Campbell, a spokesman for ATF, told CNN, "We've had people trading our undercover agents kilos of cocaine for cigarettes."

As heart-warming as it is to see people defying government nannies to indulge in the vices of their choice, there is a very real price to be paid when governments try to prohibit things overtly or by tax, and thereby create a black market. LaFaive and Nesbit point out that "[t]he destructive consequences of rampant tobacco smuggling include the corruption of government officials, violence, theft, counterfeiting and dangerous, adulterated products."

Which is to say, the black market in smuggled cigarettes resembles every other black market that prohibitionists have managed to conjure into existence. Prohibitions just don't work. Well, unless you're a black marketeer, that is.

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  • ||

    [t]he destructive consequences of rampant tobacco smuggling include the corruption of government officials, violence, theft, counterfeiting and dangerous, adulterated products

    Good. Bring. It. On. This is exactly what we need at this point. Complete, wholehearted disregard for the regime.

  • Ptah-Hotep||

    [t]he destructive consequences

    If only there were some way of avoiding these things...

  • Jordan||

    Holy shit, a 94 cent increase?!

  • Bill Door||

    Hmm... I wonder how much Obummer pays for his cigs?

  • Brandon||

    Hmm... I wonder how much we pay for Obummer's pays for his cigs?

    FTFY

  • Libertymike||

    Does Michelle deny Obama sex if she catches him smoking?

  • Hugh Akston||

    Just the opposite, I imagine.

  • Brett L||

    I think you've got the reward/punishment profile backwards, there.

  • BakedPenguin||

    I think you have the causality of events reversed there, Mike.

  • BakedPenguin||

    Or what Brett and Hugh said.

  • Libertymike||

    Brett, Hugh and BP, you guys are probably right.

  • AuH20||

    I would assume that, rather than denying him sex, she give him lots of sex, and I'm sure that this is an original thought not expressed above in some other form.

  • Tman||

    I used to think that maybe possibly perhaps at one point Obama would finally come to his senses and take a center tack like Clinton did in the 90's. Clinton's path allowed him to lie under oath about sex in the white house and yet because of the economic success (which some might argue was despite his efforts) of his term he is roundly recognized as an icon among democrats.

    Yet it appears that Obama's ego is entirely incapable of allowing him to take this path, and he continues to push for things that just make the hole he's standing in get deeper.

    I used to think he had some kind of strategy for his actions, but upon further review it is becoming abundantly clear that he is a terrible leader and has absolutely no fucking idea what he's doing.

  • Incredulous||

    Yes, he's a fucking idiot. And he's a fucking liar.

    That's been obvious for some time now but the American people reelected him anyway.

    So we have a lot of fucking idiots who voted for a fucking idiot.

  • Tman||

    But I don't understand why he doesn't realize that he's just digging the hole deeper. I thought that at some point his ego would force him to try and develop some sort of legacy so history would remember him

    What would they say about him if his presidency ended today? Can you think of any accomplishments he's had that are worthy of a decent legacy?

    I got nuthin'.

  • ||

    Obamacare, dude! Everyone's going to love it!

  • RBS||

    I think he just has no idea how to respond when someone tells him "no." He's very much a child.

  • Zeb||

    He's black (or black-ish). Isn't that enough?

  • AuH20||

    History loves a failed leftist. They were too far ahead of their time for the ignorant proles to see their obvious wisdom.

  • mad libertarian guy||

    History loves a failed leftist. They were too far ahead of their time for the ignorant proles to see their obvious wisdom.

    This.

  • Killazontherun||

    Its been clear from the beginning the man doesn't have a brain.

  • $park¥||

    or even import counterfeit cigarettes from out of the country to the booming market

    Stop right there! What the fuck is a counterfeit cigarette?

  • Lord Humungus||

    Chinese?

  • Libertymike||

    Well, anything that is marketed, packaged and sold as "light".

  • John Thacker||

    There are at least two types that exist:

    1) Cigarettes counterfeited to look like a popular brand of cigarettes, and

    2) Cigarettes with counterfeit state tax stamps placed on the pack.

  • RBS||

    I'm guessing cigs made in china but branded as american?

  • ||

    Arizona 54.4 ???
    Even if they are counting smokes purchased on the rez and brought back from Mexico I'm not seeing it add up to over half the cigarettes in the state.

  • ||

    Do any of the municipalities or counties have extra cigarette taxes? It could be legit cigarettes smuggled over county or city lines. We get that here in Chi.

  • ||

    Not that I know of.

    Here in Tucson,we are seeing a huge increase in strong arm theft of smokes at convenience stores. Eventually, higher taxes on smokes are going to get people killed

  • mad libertarian guy||

    Here in Tucson,we are seeing a huge increase in strong arm theft of smokes at convenience stores. Eventually, higher taxes on smokes are going to get people killed

    Which, according to statists, will only prove just how dangerous cigarette smoking is, and that it must be banned. For the children.

  • jdtuccille||

    What they find is that a lot of the cigarettes sold in stores are sourced from smugglers. It's not just rez and cross-border sales. The black market is big enough to act as a wholesaler.

  • ||

    So, they are spoofing the tax stamps?

    I've been approached to buy smokes in a bar but the were obviously smuggled as they had no stamp

  • jdtuccille||

    Often the tax stamps are counterfeit. Sometimes, in smaller stores, they don't even bother.

  • Rights-Minimalist Autocrat||

    Selling at the same price as taxed cigs? Somebody's making a bundle.

  • ||

    That's an important point to remember just days after the president called for a 94 cent hike in federal cigarette taxes.

    I have this weird, vague memory...it's so old and hazy...something about...not raising taxes on people making less than $250k? Something about that? And something about how that promise was violated within weeks when Obama passed his first cigarette tax increase? But oh, so silly, smokers aren't people, how could I forget?

  • CampingInYourPark||

    I have this weird, vague memory...it's so old and hazy...something about...not raising taxes on people making less than $250k?

    Only the rich can afford to smoke

  • John Thacker||

    Well, clearly only people making more than $250k smoke cigarettes. Poorer people make do with pipe tobacco and chaw.

  • RBS||

    Smokers aren't people.

  • ||

    Well, smokers aren't humans, at least.

  • AuH20||

    Perhaps this bespeaks the humanity that we generally afford smokers? I dunno, I'm just guessing, hopefully people above or below me could put that sentiment more succinctly,

  • $park¥||

    New York also has the nation’s highest state cigarette tax at $4.35 per pack, plus another $1.50 levied in New York City

    Mind. Blown.

    I remember paying $2.50/pack when I was smoking. I'm glad I quit.

  • Brett L||

    Started at $1.65 a pack or $15/carton.

  • ||

    See, that's just letting the state win!

  • $park¥||

    Considering I quit almost 20 years ago because I was sick of doing it, I give no credit to the state.

  • Rights-Minimalist Autocrat||

    Dammit, I like the way you think. I don't smoke, but I'm about to start. Black market only.

  • AlmightyJB||

    Some day, all markets will be black.

  • AuH20||

    See Europe, Continent of.

  • Pro Libertate||

    Is the tax more than the retail price of the product, then?

  • ||

    Isn't it in a lot of places by now? Sure seems that way.

  • gaoxiaen||

    Does the Pope shit in the woods?

  • ||

    Dude, I remember in 1990, buying a pack of smokes for $2 by scrounging for change in my apartment. Bonus part: I bought them from a vending machine in the lobby of my apartment building in Baltimore. Bonus bonus part: I was really, really stoned.

  • $park¥||

    Back in the late 80s, before I graduated high school, my dad found my hidden pack in my room. He didn't yell at me or anything, he said he wouldn't because both of my parents smoked. I think he was trying to get me to quit when he offered me one of his, IT WAS MENTHOL!

  • ||

    I didn't realize you were black, dude.

  • $park¥||

    Neither did I, my parents smoked Salems but I think my grandparents smoked real cigarettes.

  • RBS||

    Ha, my wife used to smoke menthols. I think my dying words will be something like "I can't believe you smoked those fucking things."

  • Killazontherun||

    I like the oily texture and minty, smoky flavor of the inside of my wife's mouth when we make out, so quite the opposite here.

  • albo||

    US military base overseas 30 years ago: 50 cents a pack, a mere fin per carton.

    Of course, a case of good German beer was $5, too.

  • carol||

    Thirty years ago you could buy a carton for five bucks at Incirlik and sell them off base for twenty bucks. We were allowed four cartons plus twenty packs a month per person. I don't remember what the penalty was for getting caught selling on the black market but I remember that a lot of people were willing to risk it.

  • PACW||

    $6.00 a carton junior year of high school.

    As prices rised I remember hearing that at $1.00 a pack most people would quit. Same folks who said when gas hit $1.00 a gallon our car culture would basically die and we would all embrace public transpo!

  • BakedPenguin||

    It's hardly like this is anything new. My grandfather smuggled smokes from the US into Canada in the 1950's, as it was a far more profitable venture than farming in Eastern Canada. I remember my Grandmother telling me about how they were once warned by someone with Mountie connections that there was a trap ahead, and they hurriedly buried dozen of cartons in some snowdrift to be repossessed later.

  • ||

    You're fucking Canadian?!? GET HIM!!!

  • Pro Libertate||

    How do you fuck Canadian? Do they do it differently?

  • ||

    Slightly. Toques are involved. It's complicated.

  • Pro Libertate||

    There's lots of mounting going on, right? I mean, that's why we keep hearing about Mounties?

  • BakedPenguin||

    How do you fuck Canadian? Do they do it differently?

    You wear a toque instead of a rubber.

  • BakedPenguin||

    WOP PWND!

  • $park¥||

    Why don't you just wear a rubber toque? Or would that be making it too complicated?

  • BakedPenguin||

    Who says we don't? Rule 34, Sparky.

  • ||

    I am so pleased to see so many people using the correct word for knit winter headwear. Carry on, good sirs. Spread the good news.

  • ||

    Wait, we're not talking about some kind of sexual utensil? Goddammit, and I had my credit card out and everything.

  • ||

    It depends on what you want to do with the pom pom.

  • ||

    Go on...

  • ||

    This could work, if it is real fur.

  • Virginian||

    * Googles toque*

    Oh you mean a watch cap.

  • ||

    Virginian, you ignorant slut, do you see a pom pom on any of those?

  • Virginian||

    I think someone wore one of those to school once. We mocked him until he cut the pom pom off with some scissors.

  • Auric Demonocles||

    I've actually only ever heard my father call them toques.

  • db||

    I hear everything's sideways down there.

  • Auric Demonocles||

    Instead of body chocolate and strawberries, you use gravy and cheese curds.

  • AuH20||

    You have to convert everything to metric. Its a pain in the ass.

  • Raston Bot||

    Target the per bbl tax on beer in 3.. 2..

    http://www.ttb.gov/tax_audit/atftaxes.shtml#Beer

  • Sevo||

    "politicans around the country have turned to burdensome tariffs on stuff they don't like"

    I find this doubtful. Seems they could care less about smoking, since tobacco is still a subsidized crop. I'm pretty sure they simply see it as a socially-acceptable (huge) tax increase.

  • John Thacker||

    The Fair and Equitable Tobacco Reform Act of 2004 bought out the tobacco quotas and ended the marketing and price support programs that had existed since 1938. In which ways is it still subsidized?

  • John Thacker||

    It's true that the buyout payments are still going on (they were scheduled for 10 years, from 2005 to 2014, and are about to expire), and that bears watching. But the former quota owners can plant anything else and still get the money.

  • Sevo||

    I stand corrected re: that part of my post.

  • Tim||

    Pot will be legal, tobacco will be criminal. At least all the SWAT teams, dogs, helicopters and shit won't go to waste.

  • db||

    Just like how they needed to keep employing all the federal agents after alcohol Prohibition so they passed the NFA in 1934.

  • Tim||

    Coming: the Bureau of Alcohol, Tobacco, Firearms, Explosives and Sugar Based Beverages.

  • Virginian||

    Oh god that's gonna happen.

  • LTC(ret) John||

    Don't they have that in NYC already?

  • Killazontherun||

    Not that long ago this slice of suburbia use to be a town centered around growing tobacco. My maternal grandfather owned a forty acre farm on the other side of town that is now converted into housing plots. Very nice ones, with an upper middle class taxbase that supports the dominant high school football and basketball team in the state.

    A decade ago a neighbor retired from farming and did the same thing. Some farms still remain the further north you travel from Greensboro. I helped my retiring neighbor with his last haul. In the middle of curing the last crop he said the hell with it, it wasn't worth his time to take the remainder to market in terms of his bottom line. Gave me thirty five lbs worth for helping him out. I still have it vacuum sealed in my shop basement. 2chille article makes me think I'm sitting on a small fortune. I never really considered smuggling before as brand loyality is the single biggest economic determining factor in that market, but surely with the utter stupidity of New York law that too has broken down considerably.

  • NeonCat||

    It will be a sad day indeed when no tobacco is grown in Tobaccoville.

    And for people who haven't lived in NC, yes, it's a real town.

  • WomSom||

    This makes a lot of sense dude. Wow.

    www.AnonHit.tk

  • prolefeed||

    We find that New York currently holds the top position as the highest net importer of smuggled cigarettes in 2011, with smuggled cigarettes totaling a staggering 60.9 percent of the total market.

    Umm ... WTF? How can anyone claim to know, to three digits precision, the ratio of smuggled cigarettes to legal cigarettes? The whole point of smuggling is to prevent others from finding out about the smuggling.

  • Agammamon||

    For those smuggling stat - how much of that smuggling is actually people buying on the reservation and bringing them home?

    Because several of those states (AZ for example) have a ton of reservations that are in easy reach of major cities.

  • Donnyork||

    "Sin" taxing has raised the cost of cigarettes so that many who need them can't afford them. Given nicotine’s scientifically verified benefit to some individuals’ successful daily functioning, our most charitable act for many of the less fortunate might be gifting cigarettes to them. The CHIPRA children's health care program utterly depends on tobacco taxation, so "If you're not buying cigarettes, then What Kind of Citizen ARE You?" If you please, here's my anti-tobacco-tax case in a foot-stomper song:
    http://www.youtube.com/watch?v=RpXjVq5Q6S0

  • wr777||

    My wife and I save close to $2,000/year by buying from AAA Tobacco because of cigarette taxes. And it keeps the money out of the black market, big corporations and in the hands of small business owners...

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