Van Dough

Why cigarette smugglers love New York.


In Elizabethan England, the historian Egon Corti reports, tobacco sold for its weight in silver. That would suit New York Mayor Michael Bloomberg just fine.

Bloomberg recently signed a bill raising the city's cigarette tax from 8 cents to $1.50 a pack. With a state tax of $1.50, the highest in the country, New Yorkers were already paying more for cigarettes than other Americans. Now the price of some brands is more than $7, nearly twice the national average.

Ostensibly, the tax hike was a revenue measure. "City officials say the new tax will bring a much-needed $111 million into the city's coffers this year," The New York Times reported, "helping plug a budget shortfall of nearly $5 billion."

But Bloomberg said it was really all about public health. "This may be the most important measure my administration takes to save people's lives," he declared, arguing that higher cigarette prices will encourage smokers to quit, giving them extra years in which to thank him for the favor he is doing them.

In fact, the mayor doesn't even want the money. "If it were totally up to me," he said, "I would raise the cigarette tax so high the revenues from it would go to zero."

Bloomberg thus announced the purity of his own motives even as he took his cut from a business the anti-smoking movement depicts as inherently evil, profiting from the deadly folly of its customers. When a New Yorker buys a pack of Marlboros, the city will make four or five times as much as Philip Morris does. But that's OK, because the mayor's heart is in the right place.

For politicians confronting budget deficits, the opportunity to raise money at the expense of an unpopular minority while expressing sympathy for the people they're fleecing is hard to resist. So far this year 17 states have raised their cigarette taxes, and others are considering it.

But this competition to pick smokers' pockets--I mean, to save smokers' lives--does have limits. Although Bloomberg seems to think that a high enough tax would eliminate smoking, in the real world smokers have alternatives.

Rather than pay $7.25 for a pack of Camels, for instance, they can buy them online for $2.70. Or they can buy them untaxed in New York, courtesy of smugglers who already make a nice living transporting cigarettes from low-tax states in the South to high-tax states in the Northeast.

The cigarette tax in New York City, where I used to live, is more than 100 times the tax in Virginia, where I live now. I may get into the business myself.

Then again, the competition might be a little too rough for me. Last year the FBI announced the arrest of 17 people accused of smuggling cigarettes from North Carolina to raise money for the terrorist group Hezbollah.

The government said the ring was earning as much as $10,000 with each van load. Thanks to Michael Bloomberg and the New York City Council, the potential earnings for terrorists have multiplied.

Robert L. Shepherd, a former New York State tax official, predicts the city will see a decline in revenue as smokers shop around. "I think with $1.50 they'll pass the tipping point," he told the Times. That's what happened several years ago in Canada, where the government was forced to cut cigarette taxes in response to widespread smuggling and evasion.

Yet Bloomberg, who equates zero tax revenue with zero smoking, apparently thinks smokers will not be resourceful enough to avoid his tax. He also seems to discount the possibility that they will respond to higher prices by, say, economizing on other expenditures, getting a second job, dipping into their savings, going into debt, or turning to crime.

These assumptions are surprising, since Bloomberg also believes that life without nicotine is unthinkable for the average smoker. "This is not exactly freedom of choice," he informed opponents of the tax hike, "given that smoking is addictive and that the industry spends billions of dollars to get people hooked on it."

No doubt Bloomberg is right that some smokers will quit rather than pay exorbitant prices or go to the trouble of finding alternative supplies. But that choice will demonstrate that they were never the helpless victims he makes them out to be.