Those cigarette taxes are sure working out, eh?

posted at 2:31 pm on December 15, 2012 by Jazz Shaw

Taking a break from the firestorm of sad news this weekend, let’s circle back and see how things are going in the states which have chosen to sin tax their way back to prosperity. First, my own home stomping grounds of New York, which has been seeking a way to stave off total fiscal collapse by jacking up one of the highest tobacco tax rates in the nation. How’s that working out for ya?

ALBANY – Chronic cigarette-tax evasion continues to cost New York State at least $1.7 billion a year in tax revenue and 6,700 jobs, according to a new report from the New York Association of Convenience Stores (NYACS).

Commissioned by NYACS, the economic study by John Dunham & Associates determined that in 2011, one of every two packs of cigarettes consumed in New York State escapes collection of New York State taxes. “This is further proof that New York, which has the highest cigarette excise tax in the nation, continues to suffer the corrosive economic and fiscal effects of the worst cigarette tax evasion in the nation,” said NYACS President James Calvin in a press release.

Their study finds that nearly half of the packs of smokes purchased in New York were “from other states, Indian reservations, duty-free shops, and military bases.” And that doesn’t take into account the number of smokers who are choosing to do their shopping with black market bootleggers who are increasingly prevalent in sections of the state which are further from the border. This has led to the “unexpected” result of more police resources being diverted to enforcement efforts, more people winding up in jail and more small businesses being swept up in the wreckage and disarray. In short, rather than soaking up more cash with this tax, New York is actually losing money on the deal. Who could possibly have predicted that?

But that’s just New York. We’re kind of weird out here anyway, right? So maybe this case is just an outlier. I’m sure things are working out much better in Chicago, where Illinois is quickly moving to catch New York in the smoke tax category. The money surely must be rolling in by now.

CHICAGO (CBS) – Cook County investigators have been raiding stores across the county that have been breaking the law, and ripping off taxpayers of millions of dollars, by selling cigarettes without proper taxes…

About 800 raids take place each month.

“Roughly a quarter of them result in confiscations,” Cook County Board President Toni Preckwinkle said.

“In the last fiscal year, it was a loss of $6 million,” she added. “$6 million would make a great deal of difference to our healthcare system, or to our criminal justice system.”

Chicago has at least found a way to make up some of the loss, giving credit where credit is due. To date they have managed to issue more than $1.3M in fines, largely against small retail outlets who sell cigarettes. So they’ve got that going for them I guess. And hey… they’re creating jobs, too.

The Cook County Department of Revenue has planned to hire even more investigators in 2013. The goal is to carry out even more raids, at night.

This is what we’re devoting our law enforcement resources to in the midst of all the other problems facing these states. Meanwhile, revenue is driven out of the state, businesses are beaten down and an entire new industry has cropped up for criminal networks in two places already famous for organized crime activity. Way to go, guys. Another fine product brought to you by your tax dollars at work.


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