Maryland Plans on Big Boost For Black Market Cigarettes


Assef Elweter

Strictly speaking, Maryland lawmakers aren't overtly planning a gift to cigarette smugglers, but that's certainly going to be the ultimate result of a proposal to massively hike taxes on all sorts of tobacco products. The share of cigarettes supplied in the state by the black market more than doubled from 2006 to 2011 under the pressure of politicians' appetite for other people's money. That can only continue to grow if SB 589 becomes law and gives the state the fourth highest cigarette tax rate in the country.

According to Jeremy Bauer-Wolfe at MarylandReporter:

The Senate Budget and Taxation Committee heard testimony Wednesday on SB 589, which would increase the tobacco tax rate from $2 for a pack of cigarettes to $3. The bill also calls for steep hike on all other tobacco products — from 30% to 95% of the wholesale price.

Products affected would include cigars, roll-your-own, and forms of smokeless tobacco.

The bill would give Maryland the fourth highest tobacco tax rates in the nation. No. 1 is New York at $4.35 per pack of cigarettes. (Cigarette smugglers nabbed by comptroller's agents coming through Maryland from 30 cents-a-pack Virginia are often headed to New York.)

According to estimates by the Mackinac Center for Public Policy, which tracks tobacco taxes and smuggling, 25.76 percent of Maryland's cigarettes come from the black market, up from 10.38 percent in 2006 (the state doubled cigarette taxes in 2007). Not only is it logical to expect that a further hike in taxes would increase illegal sourcing of tobacco products, but Mackinac's Michael D. LaFaive and Todd Nesbit were even kind enough to suggest by how much:

We also modeled for Maryland the impact of a recently proposed 50 percent hike in its excise tax, from $2 per pack to $3. If such an increase were enacted in Maryland, the proportion of smuggled cigarettes consumed by its smokers would leap from 26 percent of the total market to 52 percent, and would actually result in a net decline in tobacco tax revenues.

In New York, with the highest taxes in the country, the black market already supplies 60.94 percent of the market, so a 52 percent share seems quite plausible if Maryland lawmakers move forward with their attempted mugging of the state's smokers. To beat the taxman, smokes are smuggled in from low-tax jurisdictions, from out of the country, or manufactured off the books and under the legal radar.

Legislators really are the gift that keeps on giving—to people who find economic opportunity in restrictive laws and high taxes. Participants in the underground economy may want to consider settting aside a few bundles of smoke-infused cash as thank-you campaign donations to legislators. If they didn't already do so to get to this point, that is.

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  1. Last time New York raised the Tobacco tax, the legislators threw a fit when tax revenue dropped.

    1. *Yes I know the article is about Maryland making the same mistake, but the lessons learned are still applicable.

  2. “Strictly speaking, Maryland lawmakers aren’t overtly planning a gift to cigarette smugglers.”

    I wouldn’t necessarily assume that.

    1. Foreseeable consequences are no unintended.

      I don’t give a fuck what politicians “overtly” (read: admit to) planning.

      I give a fuck what they do, and what the consequences of that are.

  3. Based on these statistics of top tobacco growing regions by acreage:

    1. North Carolina 170,083
    2. Kentucky 87,641
    3. Virginia 20,881

    it will be incredibly easy to smuggle cheap tobacco into Maryland — for example, a 5 hour drive from Durham, NC to Baltimore MD.

    1. It’s even more retarded than I thought — the state with the next to lowest cigarette taxes in the nation — Virginia at $0.30 a pack — borders Maryland.

      Though perhaps the wholesale prices in NC are low enough to make smuggling from there even more profitable despite the longer drive and the $0.45 a pack tax.

  4. If such an increase were enacted in Maryland, the proportion of smuggled cigarettes consumed by its smokers would leap from 26 percent of the total market to 52 percent, and would actually result in a net decline in tobacco tax revenues.

    That sounds like Reaganomics and the satanically inspired Laffer curve, so I won’t listen. Also, intent is magic.

  5. Virginia is way too close to Maryland for them to keep jacking up the prices. Cigs are relatively cheap in Virginia. A carton of say Marlboros will go for about $45 at the Pentagon City Costco, but it’ll go for about $65 in a Maryland Costco. Hell, even DC prices are lower than Maryland.

    1. Maryland’s two most populous counties border DC and VA. You’d think that someone would have taken that into account.

      1. These are the same people who can’t understand Econ 101 or incentives.

      2. Well, they do have a complaint in the article from a Republican Senator from the Eastern Shore about likely smuggling, but, really, in Maryland they don’t have to care what the Republicans think.

  6. Virginia is way too close to Maryland for them to increase government revenue by keep jacking up the prices.

    FTFY. Never assume that government officials won’t double down on stupid policies that don’t have the intended outcome, because intentions trump reality for some politicians.

    1. Especially in Maryland. Politicians have been trying the same things for decades to breath life back into Baltimore City and its public schools. When anyone asks why it’ll be different this time, “Shut up,” they explain.

  7. Well, they just need to have more Police, more inspections, more investigations, more harassment and more violence to foster compliance.

    For the children.

  8. When I first went to Mexico in 1957, I was shocked to see cigarettes
    cost 4 cents a pack! I brought back several cartons, because they cost about 25 or 30 cents back then.
    Is tobacco hard to grow? Smokers, grow your own, and forget big brother.

  9. Yes tobacco is hard to grow. The seedlings are impossibly delicate, and in all of the northernish states the growing season is too short so you have to start them in a green house to even have a small chance of getting the plants to maturity.

  10. No, tobacco is very, very easy to grow.
    Disregard all the (purposely?) complicated directions and toss your tobacco seeds directly on the ground. Very carefully water, and let nature run its course. I grow a 600 sq ft plot of naturally seeded tobacco every year, dry it in my shed and give the cured leaves to my friends who smoke, chew and dip. No, it doesn’t taste like Marlboro’s. You must add all sorts of vile chemicals to get that taste, but there is a lot of nicotine which is all tobacco addicts really want. Oh and it’s legal to grow in all 50 states and in every country on the planet.

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