Taxing Credulity

In today's NY Sun the paper editorializes on the much trumpeted decline in the consumption of cigarettes. What is fascinating in the Sun's take on all this euphoria is the apparent disparity between the sale of "legally traded cigarettes" and the percentage of Americans who continue to smoke (something that has barely changed at all).

What this means, if the dichotomy holds up, is that all of the "taxes up, teen consumption down" rhetoric is pure hokum. We've made this point before: if black market cigarettes are readily available on the street than price increases will only drive more business to the illegal sellers. And that is exactly what has happened.

As the Sun's editorial highlights, "...up to 110,000 cartons of untaxed cigarettes are smuggled into New York City each day..." If a black marketeer brings just one truck of low or no-taxed smokes into the city he or she is looking at a profit of--minimally--$2 million "for one day's work."

Of course the situation is exacerbated in NYC by the existence of the Indian loophole. We have two "tribes" out on the East End of Long Island (neither is officially designated as such by the federal government) that are selling "untaxed" smokes with impunity and the 50 mile hike into the city is a short cut to big profits for enterprising black marketeers.