January 15, 2013

Cigarette Smuggling On The Rise

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.

We have written a ton about the adverse effects of raising cigarette tax rates in Missouri (and even produced a video). Missourians voted against a rate increase last November.

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?

My personal opinion is yes, we should discourage smoking among teens. We all know how bad it is for our health; we have seen (and turned away from) the graphic anti-smoking TV advertisements.

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.

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