When Politicians Raise Cigarette Taxes, the Terrorists Win. No, Really.


This week the New York legislature approved a $1.60-per-pack hike in the state's cigarette tax. As of July 1, the state tax will be $3.10 $4.35, the highest in the country. That's in addition to a federal tax of $1.01. In New York City, which imposes its own levy of $1.50 a pack, the total tax will be $5.61 $6.86, not counting a sales tax of 8.5 percent. The upshot is that premium brands will cost more than $11 a pack, with taxes accounting for the vast majority of the price. In New York City, the government will be making more than 20 times as much on each pack of cigarettes as the tobacco companies do. (Nationwide, by R.J. Reynolds' reckoning, the government's average profit on each pack of cigarettes was $3.17 in 2009, compared to the company's profit of 30 cents or so, which makes Philip Morris et al. look like minor shareholders in the business.)

The heavy taxation has elicited concerns about black market activity as well as complaints from smokers. Assemblyman Michael Benjamin (D-Bronx) told New York Daily News political columnist Celeste Katz that "he reluctantly voted for the hike because he didn't want to abet bringing state government to a halt by not voting for the budget bill that included the tax." But Benjamin sees the tax increase as a victory for terrorists:

Criminals and terrorists will be further enticed to take advantage of the price differential between high tax and low tax jurisdictions, i.e., NYS/NYC, Native American reservation smokeshops, and/or any southern state. We are sowing the seeds of increased terrorism-related activities by those who mean America, Israel and our other allies harm….

Terrorists win when smokers/grocers buy bootleg, untaxed cigarettes. Bootleggers will have an enormous incentive to smuggle untaxed cigarettes into New York. A convicted bootlegger funded the Lackawanna Six. Phony tax stamps were found in apartments used by the 1993 WTC bombers and a group of Bronx Muslims arrested last month. Interpol and the ATF have identified cigarette smuggling as a revenue source for international terrorism….Yesterday's budget action has set plans in motion for those who wish the USA and Israel harm.

Although both Katz and Jaya Saxena at the Gothamist treat Benjamin's comments as patently absurd, it's indisputable that cigarette smuggling is a significant source of income for terrorist groups such as Al Qaeda and Hezbollah, along with run-of-the-mill thugs, and that legislators enhance this opportunity by approving dramatic tax increases like this one. It is more reasonable to blame politicians for the problem than it is to blame smokers looking for affordable cigarettes, just as it is more reasonable to blame prohibitionists for helping to fund terrorists and other criminals by creating a lucrative black market in politically incorrect intoxicants than it is to blame drug users, as the federal government's anti-drug propaganda does.

[I've corrected the state tax figures, which were off by $1.25 in the original post.]