How New York City's Steep Cigarette Taxes Create Crime and Grow Big Government

The Nanny State encourages foul habits.

Back around the turn of the millennium New York had a mayor named Rudy Giuliani, who was sort of the Chris Christie of his day. He was a Republican, and a conservative if you're grading on a curve, and he fancied himself a teller of hard truths. So when he and Virginia's governor at the time, Jim Gilmore, had a difference of opinion about garbage shipments, Giuliani gave the commonwealth what-for.

The Big Apple spits out a lot of trash, and it has to go somewhere—somewhere else, that is. The city closed its last landfill on Giuliani's watch, which hiked the already substantial volume of NYC garbage shipped to Virginia.

When Virginians got wind of this—thanks partly to a public announcement by Giuliani, who was running for re-election—they objected. Gilmore pronounced himself outraged and pledged to stop the barges. Lawmakers, sensing a winning issue, puffed out their chests and started drafting legislation to that effect.

Giuliani ruffled his own plumage in return. He pointed out (sensibly enough) that while the city paid waste companies to haul the trash away, it had no say in where the stuff went after that. He noted (correctly) that New York garbage is no worse than Virginia garbage. He predicted (accurately, as it turned out) that courts would conclude banning the barges violates the Constitution, which stipulates that only Congress can regulate interstate commerce.

And then he stuck his foot in it.

Giuliani claimed Virginians had an "obligation" to take New York garbage—because after all New York, which was God's gift to the arts, had graced the world with a variety of cultural blessings, of which Virginians sometimes took part. Taking New York's trash therefore evened the scales again, or something.

You can imagine how that went over. Virginia promptly banned New York garbage shipments. Waste Management, Inc., challenged the law in court and won. Time wore on, and the whole affair eventually was forgotten.

So why dredge it all up again now? Because New York is once again exporting nasty stuff to the commonwealth: crime and big government.

Thanks to New York's laughably high cigarette taxes ($4.35 state plus another $1.60 in the city) and higher prices generally, a pack of smokes in New York City costs $14 or more. That creates a powerful incentive to smuggle smokes in from states such as Virginia, where you can buy a pack for a third of that price. Fill a Ford Econoline van with a few hundred cartons and you can make a nice five-figure profit in a weekend. Some people do.

The robust cigarette smuggling irritates officials in New York, because they miss out on a lot of tax revenue. The trade irritates officials in Virginia for the same reason, because smugglers buy wholesale to avoid the retail sales tax.

There's an easy fix for all of this: Cut New York's cigarette taxes. (Virginia could hike its own tax, but then Virginia didn't create this problem—New York did.) Yet cutting the cigarette tax would deprive New York of revenue, and we mustn't have that, oh no. Besides, it would send the wrong signal. New York wishes to make people stop smoking, and punitive taxes are the way to do that without outright banning tobacco, which would be too obviously narrow-minded.

So apparently it falls to Virginia to find a solution to the problem New York created. The state's crime commission is considering several, including requiring retailers who sell tobacco to buy a special license. Revenue from the licensing could then help fund anti-smuggling operations, which would be handled by the Department of Alcoholic Beverage Control. Virginia sells hard spirits in state-owned stores; there's more money for the government that way.

In short, the answer to a problem caused by governmental heavy-handedness in New York is to increase the degree of governmental heavy-handedness here. Isn't that always the way?

Before crossing that Rubicon, however, we first should revisit the implied calculus of the cross-state relationship. Under what one might call Giuliani Equilibrium, Virginia took both New York's good (Broadway musicals) and its bad (dumpster drippings). Now we have a new variable: smuggling, and the criminality attendant thereupon. This adds a negative to the Virginia side of the equation.

Before we add further negatives—more government, higher fees on retailers, etc.—we should first ask New York to correct this. Since it probably won't do so by cutting cigarette taxes, perhaps it could increase its output of cultural amenities. Even better, it could make Virginia the first stop for all traveling exhibitions and shows.

Contrariwise, New York could agree to import something particularly repellent and loathsome from Virginia. There are several possibilities to choose from. How about, for starters, requiring New Yorkers to preface all catty remarks about others with the two-faced disclaimer, "Bless his heart"?

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