CNBC reports that the widely differing cigarette taxes levied across the United States have given rise to a highly lucrative criminal enterprise.
There's no better example of the law of unintended consequences than cigarette taxes in the United States.
Each state sets its own rate, and the disparity is huge. Missouri's state cigarette tax is 17 cents. It's $4.35 in New York.
What's the unintended consequence? Crime.
According to the Bureau of Alcohol, Tobacco and Firearms, the United States loses $5 billion in tax revenue every year from the trafficking of illegal cigarettes. Worldwide, it's a $100 billion problem, and it's the No. 1 economic crime in Europe.
"We liken it to the new prohibition era," Special Agent Ashan Benedict told CNBC for the upcoming documentary Cigarette Wars. "We haven't outlawed cigarettes yet, but it's taxed to the point where the criminals know they make a lot of money trafficking."
The crime has several variations, but it's extremely simple. The most common way: Buy cigarettes in a low-tax state and sell them in a high tax state. The tax disparity is straight profit.
"A carton of cigarettes in Virginia is $30," Benedict said. "In New York City, it can be $90 or more. That's just one carton.
"You start dealing with hundreds and hundreds of cartons, and folks are making more money selling cigarettes up north than drugs."
One truckload can translate into $1 million in cash.
There's more at the link.
I knew cigarette smuggling existed, of course, but I hadn't realized just how much money could be made in this racket! It's probably more profitable than drugs, at least in some areas. So, as well as contributing to serious health problems, cigarettes contribute to a serious crime problem too!
I wonder what would happen to state revenues if they agreed on a common tax rate for cigarettes, and implemented it across the nation, so that every state derived the same revenue from every pack sold? I suspect the gross 'take' would go up quite significantly, because the criminal trafficking of cigarettes would be effectively eliminated.
Makes you think, doesn't it?