Taxes have consequences. One is black markets.
Vice.com’s “Black Market: Dispatches” just ran an episode on Ukraine’s “people who rely on the underground cigarette trade for survival during a time of war and economic struggle.” They smuggle smokes West into the wealth European Union. Here’s a preview.
Asks a journalist, “Do you see yourself as a criminal at all?”
“I am criminal? No,” responds the smuggler. “It’s maybe not legal, but…”
That reminds me of the scene in “The Godfather” where Virgil “The Turk” Solozzo tries to get Don Corleone to get into narcotics. The Don replies, “I must say no to you. And I’ll give you my reasons. It’s true I have a lot of friends in politics. But they wouldn’t be friendly for long if they knew my business was drugs instead of gambling, which they regard as a harmless vice. But drugs is a dirty business.”
Nowadays, we have gambling on Indian reservations, a state lottery and even marijuana is close to legalization. Which gives smugglers all the more reason to prefer cigarettes.
And the higher the price, the more incentive to smuggle. Under Prop. 56, the California state tobacco tax, by itself, would rise to $2.87 a pack from the current 87 cents a pack; compared to 37 cents in Georgia, 30 cents in Virginia and 17 cents in Missouri (which also is voting on increases, to as much as 70 cents).
So if the $2 a pack increase of Proposition 56 passes on Nov. 8, smuggling is going to rise faster than you can say, “I’d walk a mile for a Camel.” But smuggling coffin nails still, of course, is illegal. Prop. 56’s text even dedicates $48 million of its takings to “law enforcement efforts to reduce illegal sales of tobacco products, particularly illegal sales to minors; to reduce cigarette smuggling, tobacco tax evasion, the sale of tobacco products without a license and the sale of counterfeit tobacco products,” and so on.
That $48 million is out of an expected $1.4 billion from the tax increase, or just 3.4 percent of the total, which should prove a pittance.
The cost of a pack will rise to around $9.50 from $7.50 at major grocery stores; but to $7.50 from $5.50 at discount stores.
But there are other factors. If elected president, Hillary Clinton likely would push a national tobacco tax increase to pay for more socialized medicine. In 2009, with Hillary’s backing, President Obama boosted the federal excise tax on tobacco to $1.01 a pack from 39 cents. However, Hillary would not build a wall along the Mexican border, meaning more illegal cigs would flow from there.
By contrast, if president, Donald Trump likely would not increase tobacco taxes. But even if he doesn’t build all the Trump Wall, he almost certainly would build some of it, while tightening border controls, making Mexican contraband cigarettes less attractive but Virginia and Georgia smokes more attractive for shipping to the Golden State.
So how would Prop. 56 kill? We’ve seen this already. One of the incidents that has increased racial tensions in America was the death of Eric Garner, a black man, in New York City in 2014. He died of a heart attack when police used force to arrest him for selling contraband cigarettes.
According to one report, “NYPD was evidently investigating one of New York’s most egregious crimes – face-to-face cigarette sales on the sidewalk. With New York City’s oppressive ‘sin taxes,’ packs of smokes cost as much as $12 to $14 each. Mr. Garner had in the past been arrested for selling cigarettes for 50 cents apiece. NYPD believed that he was doing it again.”
“We can no longer stand by when black lives are discounted,” wrote Black Lives Matter on its website. “The absence of accountability in the recent deaths of Trayvon Martin, Michael Brown and Eric Garner and the death of 12 year old Tamir Rice are a breaking point in humanity’s conscience and the inception of a new movement in America.”
Garner’s mother, Gwen Carr, spoke at the Democratic National Convention. That’s ironic given how much Democrats have pushed higher cigarette taxes, but par for the course in politics.
We’re likely to see more of these confrontations, some likely leading to deaths, perhaps followed by rioting.
Worse, Prop. 56 even treats tobacco-less vapes as if they were tobacco. It reads, idiotically, “The purpose of this act is to increase the tax on tobacco and other tobacco products, including electronic cigarettes….” But electronic “cigarettes” are not cigarettes any more than root beer is real beer.
So Prop. 56 will create another huge black market where one doesn’t now exist – for vapes!
Then there’s terrorism. Back in 2002, Michigan increased its tobacco tax to $1.25 per pack from 75 cents; it’s now even higher, at $2.
In 2004, the Washington Post reported, “In another case in September, Hassan Moussa Makki, 41, a key player in a multimillion-dollar interstate cigarette smuggling ring, pleaded guilty in Michigan to providing material support for terrorism and participating in a racketeering conspiracy. Prosecutors said he also funneled money to Hezbollah….
“Cigarette trafficking is difficult to stop, partly because tobacco is a legal commodity. Smuggling cigarettes becomes a federal crime only when more than 60,000 cigarettes, or 300 cartons, are purchased to avoid payment of state tax, said Jerry Bowerman, chief of the ATF alcohol and tobacco enforcement branch.
“[U.S. Attorney Paul J.] McNulty said catching the suspects is extremely labor-intensive.”
Stealing smokes also will increase. At nearly $100 a carton, cigarettes are a light, valuable commodity. After a drug or liquor store is ripped off, a couple thousand dollars’ worth of smokes can be stuffed into the trunk of a getaway car.
Oh, and criminals won’t be following all California’s new gun-control laws, including Proposition 63 if it passes. Only honest citizens will. Including smokers.
Veteran California journalist John Seiler’s site is: SeilerReport.com. His email: mailto:writejohnseiler@gmail.com