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.”