New plan – let the feds trace cigarette traffic

posted at 2:31 pm on January 11, 2014 by Jazz Shaw

For quite a while now we’ve been telling you about expanded state government efforts to impose sin taxes on tobacco sales and how the law of unintended consequences comes into play when they do. It seems that somebody has been listening, because researchers have been finding out just how much smuggling has been going on in areas where big tax increases were levied and the news is more than a little disturbing. So should the states reconsider these policies in light of these finding? Of course not! We should spend more money at the federal level to trace packs of smokes from the manufacturer to the consumer.

A federal program that let law enforcement trace cigarette packs from manufacturer to consumer would reduce interstate trafficking and boost the public health benefits of state cigarette tax policies, researchers say.

Without a national tracking system in place, smokers evade taxes, there’s less of a barrier to youth smoking and local governments miss out on revenue, the authors of a new study contend.

Even if the method is faulty, the problem they are highlighting is very real. In the areas where these sin taxes were jacked up the highest, it should come as no surprise that the greatest volume of illegally trafficked smokes was found. The group went around collecting empty cigarette packs from the trash in a number of cities and found that nearly half of them lacked a tax stamp from the local area. And in the northeast corridor alone, they estimate that this is costing state and city governments as much as three quarter billion dollars per year.

Kevin Davis of the nonprofit research organization RTI International in Research Triangle Park, North Carolina, and his colleagues calculated that the cities of Boston, Philadelphia, New York, Providence and Washington, DC, combined, could collect between $690 million and $729 million per year in cigarette taxes if trafficking stopped.

“What is key about this is that these calculations are not actual losses in revenue,” Davis said. “This is money that could be added to government income.”

Of course, the results are still cloaked in the excuse that we need to charge more for tobacco products so less people will use them. (They’re just trying to save us from ourselves, don’t you know.) But the reality is that these programs do little to affect individual behavior. What they’re trying to do is maximize cash flow into government coffers and they get rather testy when people turn to smugglers to avoid the massive tax hikes.

Sooner or later these folks are going to realize that these sin tax cash grabs aren’t working. Unfortunately, given the evidence of recent history, “later” is probably a lot more likely than “sooner.”


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It’s the Laffer Curve – There is a sweet spot for taxes of all kinds where revenue is maximized. Go past that point and revenue falls because people evade the tax.

myiq2xu on January 11, 2014 at 2:36 PM

Hey federal doushe bags; If ciggeretts are so elfin bad for us hummin beans, ban ‘em you effin cowards. Otherwise quit using them as a revenue stream.

rottenrobbie on January 11, 2014 at 2:59 PM

The group went around collecting empty cigarette packs from the trash in a number of cities and found that nearly half of them lacked a tax stamp from the local area. And in the northeast corridor alone, they estimate that this is costing state and city governments as much as three quarter billion dollars per year.

Ah…no.
That is not their money.

NeoKong on January 11, 2014 at 3:00 PM

This is what will happen with Pot and Colorado….going into neighboring states.

People still make moonshine and brew beer in their basements to escape the taxes….

nazo311 on January 11, 2014 at 3:02 PM

Ah….let me name the operation……

Smoke and Mirrors

BobMbx on January 11, 2014 at 3:03 PM

Its like that fellow Laffer pointing out that there is a maximum revenue generation effect from taxes and after you get to that point you can jack them up higher and actually see revenue DECREASE.

Amazing how that works out in real life to prove it.

Perhaps someone should think about that before seeking to raise taxes on something.

ajacksonian on January 11, 2014 at 3:03 PM

The left has been consistently stupid in these matters. While they were raising the taxes, they were also rubbing their hands like grooming rats considering the size of their windfall from the new taxes.

The reality is that the left doesn’t give a rat’s fuzzy patootie about getting people to smoke less. They just care about having more money to do “good” with. Nothing else is a consideration.

Quartermaster on January 11, 2014 at 3:10 PM

I would say that if the government makes more money from a sale of an item than the manufacturer, it may be over-taxed. Avoiding over-taxation is only a crime in a legislative sense, nothing immoral about it.

May the State continue to be frustrated.

Mord on January 11, 2014 at 3:12 PM

Ah…no.
That is not their money.

NeoKong on January 11, 2014 at 3:00 PM

and

ajacksonian on January 11, 2014 at 3:03 PM

Exactly. What they are doing is motivating entrepreneurs to figure out ways around the theft of other people’s money.

This is the history of mankind.

dogsoldier on January 11, 2014 at 3:16 PM

I find it very Orwellian that the Govt is actually sifting through our trash now.

Conservalicious on January 11, 2014 at 3:18 PM

A federal program that let law enforcement trace cigarette packs from manufacturer to consumer would reduce interstate trafficking and boost the public health benefits of state cigarette tax policies, researchers say.

That’s comedy gold right there.

DarthBrooks on January 11, 2014 at 3:25 PM

Yeah, because the Feds did such a great job keeping track of weapons going into Mexico.

SickofLibs on January 11, 2014 at 3:28 PM

“Leeaaast yer, the oyal companies mayde record prahfitts! I wanna take those prahfittts…”

Lanceman on January 11, 2014 at 3:28 PM

That was that idiotic Chicago accent by that fat-assed unqualified b!tch HRC.

Lanceman on January 11, 2014 at 3:29 PM

Sooner or later these folks are going to realize that these sin tax cash grabs aren’t working. Unfortunately, given the evidence of recent history, “later” is probably a lot more likely than “sooner.”

‘these folks’ are never going to realize anything. Things are going well for them. What has to happen is that other folks have to take power away from ‘these folks’. $8 per pack is obscene. And of course ‘these folks’ are going after e-cigs now, even though nicotine is not harmful per se.

Now, when will power be taken away from ‘these folks’. Well, the Soviets lasted 70 years…i.e. don’t count on it in our lifetimes

r keller on January 11, 2014 at 3:31 PM

Yeah, good luck getting that passed in Congress.

deadrody on January 11, 2014 at 3:34 PM

Even better, lets have the ATF sell cigarettes to kids.

rbj on January 11, 2014 at 3:37 PM

The vast majority of smokers are Democrats. They voted for this. Then they cheated.

pat on January 11, 2014 at 3:39 PM

How much is going through sales by Indian Tribes?

How difficult is it for tobacco to grown at home? Is there a tax on growing one’s own?

goatweed on January 11, 2014 at 3:40 PM

The vast majority of smokers are Democrats. They voted for this. Then they cheated.

pat on January 11, 2014 at 3:39 PM

Somebody has statistics about that? LOL, scary

whbates on January 11, 2014 at 3:53 PM

I roll my own with pipe tobacco. Taxes are way cheaper and the cigs are much better. Kind of a pain in the ass but I will never buy another pack of actual cigs.

kahall on January 11, 2014 at 3:55 PM

Tobacco grows great through the heartland. You’ll need to start it indoors then transplant it outside. We grew 10 plants a few years ago and cured it for pipe smoking. its a Kentucky burly. Still have a few jars of it.

Murphy9 on January 11, 2014 at 4:00 PM

I roll my own with pipe tobacco. Taxes are way cheaper and the cigs are much better. Kind of a pain in the ass but I will never buy another pack of actual cigs.

kahall on January 11, 2014 at 3:55 PM

So do I. Smokin G tobacco and Premier tubes. Love them! I’ve been doing it for about 3 years, now. Much better than commercial cigarettes and I end up at around $1/pack. I have years of stock so I never have to worry about running out of cigarettes.

It does take some time to make them, but I don’t smoke nearly as much as I used to, so I am happy staying with the handcrank top-o-matic t2. If I were still smoking 2 or 3 packs a day like I used to I’d just invest the $500 for a fully automatic injector to pop out perfect cigs in a jiffy. Heck, $500 these days isn’t even 10 cartons of store cigs (and it’s not even 4 cartons in New York).

ThePrimordialOrderedPair on January 11, 2014 at 4:04 PM

We need to raise taxes on cigarettes to get people to quit smoking.
We rely on the taxes from cigarettes for funding precious programs.

Only a complete moron or a liberal sorry for repeating myself, could fail to see that those two goals contradict each other.

Smuggle away. When I smoked, I would order from out of the country to avoid the taxes or roll my own. Markets occur naturally, but only government can create a black market.

crashland on January 11, 2014 at 4:06 PM

Did obama buy his ciggies from DC or Chicago??

KMC1 on January 11, 2014 at 4:10 PM

They can make up the ‘missing revenue’ by legalizing weed in those states and taxing that. A la Colorado

txdoc on January 11, 2014 at 4:12 PM

Government always like to squawk about how much its costing them whenever people figure out a way to keep from being robbed.

Axion on January 11, 2014 at 4:14 PM

Yes, lets have the Feds aka the ATF investigate these lost cig taxes… its not like they’ve lost evidence before.

http://www.thefiscaltimes.com/Articles/2013/09/25/SMOKE-ATF-Loses-127-Million-Cigarettes

Must be the new Fed employee retirement plan.

oryguncon on January 11, 2014 at 4:23 PM

I switched to little cigars. $11 per carton at the Indian smoke shop on the Puyallup reservation. And no, smoke shops don’t look like what a lot of people think a reservation store looks like.

I’m just helping the Indians get their fair share.

platypus on January 11, 2014 at 4:27 PM

Did obama buy his ciggies from DC or Chicago??

KMC1 on January 11, 2014 at 4:10 PM

He probably sends one of his minions to get his cigs from Missouri.

http://www.foxnews.com/politics/2013/10/21/proposed-chicago-cigarette-tax-would-be-highest-rate-in-nation/

http://www.stltoday.com/news/local/govt-and-politics/missouri-keeps-tobacco-tax-as-the-lowest-in-the-nation/article_636bb3bb-4634-5eea-adf7-51f16cc0b333.html

Fallon on January 11, 2014 at 4:58 PM

Since about 2005 in NYC some marihuana dealers have added cigarettes to their product line. The irony is they face much more trouble for selling the untaxed cigarettes. No one does more than a few days for marihuana, but sell untaxed cigarettes and the government comes after you hard. If Bloomberg had managed to stay in office another term – they would have been able to sell soda too.

D.L.Mc on January 11, 2014 at 5:05 PM

I vape now. I save $89 a week.

Lanceman on January 11, 2014 at 5:31 PM

What they’re trying to do is maximize cash flow into government coffers

It’s called the SKIM….

Gubrmint does it to everything…. and it ain’t no different when the mafia does it..

roflmmfao

donabernathy on January 11, 2014 at 5:48 PM

Same idiocy will happen with dope sales. They will tax it back to the cartells who will sell it cheaper.

TX-96 on January 11, 2014 at 5:50 PM

…pretty soon…we’ll be growing our own!

KOOLAID2 on January 11, 2014 at 6:03 PM

Cigs here in NY are about $10/pack. Almost $15/pack in the city. Which is why I take a road trip to stock up once a week over the border in PA…cigs are about half the price.

JetBoy on January 11, 2014 at 6:05 PM

Let the ATF police it and only licensed democrats will be allowed to smuggle smokes.

Sandbar on January 11, 2014 at 6:48 PM

Cigs here in NY are about $10/pack. Almost $15/pack in the city. Which is why I take a road trip to stock up once a week over the border in PA…cigs are about half the price.

JetBoy on January 11, 2014 at 6:05 PM

Well, If you’re a pack a day smoker I hope you cut a check each year for around $1800 – 3600 to the City and State as required under USE tax laws as the good slave you are. In a way I hope they do this and bring things to a head. We need to have Use Tax laws repealed. Use Taxes essentially make every citizen a slave of the state. Saying they owe taxes on the sale of something regardless of the location of that sale. If you buy a couch at Ikea in Jersey you are supposed to pay the difference in taxes to NY. It’s completely ridiculous and needs to end.

If something is called a SALES Tax then the only taxes ever owed should be for the state in which the sale took place. Taxes on Consumable Items, and considering the quality of most things today virtually everything is consumable, simply for USING the item is just plain sick and needs to stop. Tobacco Taxes are paid by people who sell Tobacco. Yes, they pass this cost on to their consumers but it is sellers who pay the tax.

I can’t wait till we see weed legal in more places and people crossing state lines to save on the taxes. It’s a complete joke.

Rocks on January 11, 2014 at 8:07 PM

Oh, and BTW, they are wrong on where a large portion of the lost “revenue” has gone. It is not from illegal selling of cigs. A very large portion is lost because people roll their own and that is perfectly legal. All taxes are paid. They couldn’t count that because there are no cig packs discarded.

Rocks on January 11, 2014 at 8:12 PM

Rocks on January 11, 2014 at 8:07 PM

Use taxes don’t apply to JetBoy driving to PA to pick up cigarettes, since he pays PA taxes at the point of sale. You only get to skip sales taxes when the items are shipped out of state. That’s a Constitutional issue.

Of course, if JetBoy gets caught sneaking into New York with cartons of cigarettes (he’s probably only allowed to bring two in) then he could be treated as if he were running through DC with a 7000 round magazine in his pocket and no MSM press pass.

ThePrimordialOrderedPair on January 11, 2014 at 8:15 PM

…they estimate that this is costing state and city governments as much as three quarter billion dollars per year.

That obviously calls for an $8-billion per year Federal program to track and intercept this.

If these sin tax jokers had any brains at all, they would turn their States into the places to smuggle from.

ss396 on January 11, 2014 at 8:23 PM

pimps?

Thats racist.

Murphy9 on January 11, 2014 at 8:24 PM

Pirates.

Damn, too bad I don’t know anyone in the cigarette black market.

Dr. ZhivBlago on January 11, 2014 at 8:25 PM

could collect between $690 million and $729 million per year in cigarette taxes if trafficking stopped.

So when the Federal Cigarette Police end up costing way more than this (you know they will), who is going to figure out what the other states are paying so the high-taxers can get “their” moolah?

AesopFan on January 11, 2014 at 9:53 PM

And in the northeast corridor alone, they estimate that this is costing state and city governments as much as three quarter billion dollars per year.

It’s not really costing them any such amount. There was zero chance they were going to get all that money. If people smuggle, or make their own, or switch to e-cigarettes, of quit smoking, then it doesn’t matter how high the tax is, because it still comes to zero when you multiply it by zero.

What we really have here is economic illiterates pricing themselves out of a market, because they forget that customers have other options.

There Goes the Neighborhood on January 11, 2014 at 11:12 PM

Let ATF require the inclusion of serial numbers on all cig packs so they can be traced through every step of the distribution system, from manufacturer to consumer, who should have to fill out a 4473 to buy his smokes, passing a background check.
If it saves just one child….

Another Drew on January 11, 2014 at 11:31 PM

Yeah, because the Feds did such a great job keeping track of weapons going into Mexico.

SickofLibs on January 11, 2014 at 3:28 PM

I’d bet they never lose track of a single pack of smokes. And if they ever start tracking bullets, somehow they’ll know where every single one is expended. It’s amazing how competent the Gov’t gets when they are destroying freedom…

Who is John Galt on January 12, 2014 at 7:01 AM

It’s the same economic argument I’ve been having with pot prohibitionists. Government restrictions on trade yield a black market. When people can trade freely, the profit margins cannot justify illegal trade.

MJBrutus on January 12, 2014 at 8:16 AM

I have no use for cigarettes, but if your state had a tobacco settlement, what right do you still have to collect taxes?

You got your pay off. Or is it just too lucrative?

Wander on January 12, 2014 at 8:31 AM

I bought a Fresh Choice machine a few years ago and now roll my own. Best decision I ever made. The machine paid for itself many, many months ago. Now I am looking into growing my own tobacco. When taxes were low, I paid them without a single thought. Now that taxes are higher than the cost to manufacture, I began looking for alternatives. People will do that, you know.

At what point will people stop working because the income tax negates their willingness to work? I think we have reached that point but I could be wrong.

gasmeterguy on January 12, 2014 at 9:02 AM

The US government, who couldn’t track US guns in Fast and Furious, who couldn’t track weapons given to Libya, who can’t track people overstaying their Visas, and who can neither track or deport illegals entering the United States wants to track packs of cigarettes?

How hard is it to buy a carton of cigarettes and remove them all from the pack – put them in a jar or Tupperware?

Don’t you still need a warrant to track someone? Or did that get thrown out with guns and religious freedom?

katablog.com on January 12, 2014 at 10:15 AM

Use taxes don’t apply to JetBoy driving to PA to pick up cigarettes, since he pays PA taxes at the point of sale. You only get to skip sales taxes when the items are shipped out of state. That’s a Constitutional issue.

Of course, if JetBoy gets caught sneaking into New York with cartons of cigarettes (he’s probably only allowed to bring two in) then he could be treated as if he were running through DC with a 7000 round magazine in his pocket and no MSM press pass.

ThePrimordialOrderedPair on January 11, 2014 at 8:15 PM

I’d check the laws again if I were you. They are called Use taxes because they are Taxes at what you USE, regardless of where you bought them. By those laws as far as the state is concerned every time you buy a pack of cigs you owe the state those taxes. The will waive what you paid to the other state but you still owe the difference. It applies to everything. If the sales tax in NY is 9% and 5% in PA and you buy a couch in PA when you bring it home to NY you owe NY the 4% by law.

Rocks on January 12, 2014 at 10:36 AM

find it very Orwellian that the Govt is actually sifting through our trash now.

Conservalicious on January 11, 2014 at 3:18 PM

what the NSA listening on ALL our phone calls and web usaage didn’t tip you off that we now live in a Orwellian police state.

I say bring on the smugglers. At least when they ban guns we will have a large pool of people who know how to get around the government watchdogs.

unseen on January 12, 2014 at 11:50 AM

you know this was the entire purpose behind the commerce clause. To stop states from having a trade war on products. It is suppose to be unconsitutional for one state to stop the flow of a legal product across state lines via use of tax rates, tarrifs etc. A case can be made that people transporting smokes acorss state lines are doing nothing illegal nor unconsitutional.

unseen on January 12, 2014 at 11:59 AM

At what point will people stop working because the income tax negates their willingness to work? I think we have reached that point but I could be wrong.

gasmeterguy on January 12, 2014 at 9:02 AM

this was the fatal flaw and continues to be the fatal flaw in socialism/communism. Once people understand it doesn’t pay to work they stop working resulting in decreased econnomic output, long lines and starvation. Crippling provety results from socialist policies and then massive force must be used to get people to do what they used to do for a chance at a better life. Of course the elites continue to live the good life so it doesn’t matter to them until the revolts start at least.

unseen on January 12, 2014 at 12:02 PM