The Mackinac Center updated an interesting report about the prevalence of cigarette smuggling within the United States. It turns out, cigarette tax rates and smuggling rates have a lot in common. As tax rates and the price of cigarettes increase in a state, so does the amount of smuggling.
For many people, this was a disappointment. It can be counter-intuitive to think that raising the cigarette tax would be a bad thing. After all, don’t we want to discourage smoking, particularly among teens?
But as we see in the cigarette smuggling study, increasing the cigarette tax is not a guarantee that there will be a reduction in smoking. It does, however, correspond with increased black market activity. Indeed, in Kansas City, federal authorities uncovered a conspiracy to illegally traffic tens of millions of dollars worth of cigarettes. Mackinac’s report details all the destructive effects of cigarette smuggling, including “corruption of government officials, violence, theft, counterfeiting and dangerous, adulterated products.”
The high occurrence of cigarette smuggling reminds us of the unintended consequences that can arise from government activity. Raising taxes is not a surefire way to solve problems, even when it may appear as straightforward as people buying less because cigarettes cost more. If only it were that simple.