NYC Mayor Encourages Cigarette Smuggling with Plan to Massively Jack Up Prices

City with highest cost per pack also has highest bootlegging rate. Imagine that.


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Richard B. Levine/Newscom

Who knew New York City Mayor Bill de Blasio was such an open supporter of black markets?

Today de Blasio announced that he wants to make smuggling an even more financially lucrative option by jacking up the taxes on packs of cigarettes. Right now the lowest price for a pack of cigarettes in the city is $10.50 a pack. Under his proposal announced today the floor would jump to $13 a pack, the highest in the country.

By sheer coincidence (if you are completely ignorant to even the most basic concepts of economics), New York has the highest rate of cigarette smuggling in the country. Though figures are hard to nail down—black markets, being what they are—stats suggest that more than half of all cigarettes are being sold illegally and untaxed in New York.

Bootlegging of cigarettes (and alcohol, also highly taxed in New York) costs the state nearly $2 billion in tax revenue each year. Why, de Blasio's plan is almost insidiously libertarian—to deprive the state of tax revenue by pushing more and more people to participate in the black market instead of paying exorbitantly high, market-distorting costs for goods. (Small correction/clarification here: De Blasio isn't raising the taxes on cigarettes because that's actually under the control of the state. These are price controls. I've updated some subsequent sentences to reflect that.)

Setting the sarcasm aside now: De Blasio is not, in fact, in favor of black markets and evading taxes. This is not some clever Ron Swanson destroy-the-state-from-within plan. His announcement today is part of a Nanny State plan to try to reduce the number of smokers in the city of New York. That this is a regressive move that makes it harder for poorer New York City residents to buy smokes is, just like soda taxes, partly the point.

It's true that you get less of what you tax or punish. It's also true that it gets you black markets, be it drugs, cigarettes, or cheap labor that works for cash. So the logical outcome here is that more poor people who want to continue smoking will continue looking for the cheaper cigarettes that get smuggled into the state.

In order to make this plan "work" the way the city wants it to (either people smoke less or pay more) it's going to be necessary to figure out how to increase enforcement of these price minimums. And that is going to ultimately lead to more encounters between New York City's enforcement folks (as in, police) and the possibility that more of de Blasio's citizens are treated the way Eric Garner was treated. If my Twitter feed is an indication, people have not forgotten that just a few years ago, New York police killed Eric Garner because he was uncooperative when they attempted to arrest him for selling untaxed cigarettes.

De Blasio is fully on board with the concept of "broken windows" policing, where authorities aggressively attack low-level crime under the (disputed) claim it helps prevent more serious incidents. The combination of policies that encourage the black market and policies that encourage police enforcement of low-level laws creates the framework for yet another Garner to happen down the line. Though we might not know when it happens if nobody's around to catch it on video again.

Also not helping matters: The officer responsible for Garner's death had a record of complaints and is still employed by the NYPD, and the city is becoming less and less transparent about police misconduct. It's fun to joke about black markets and the economic illiteracy of public officials like de Blasio, but the potential for this pricing plan to lead to even more official violence directed toward citizens is no laughing matter.