Increases in taxes promotes organized crime
May 7, 2008 by libertyisforme
NY’s new governor recently approved a new tax of $1.25 on cigarettes. This is on top of its existing tax, $1.50.
The government is making smoking unaffordable, so be prepared to drive to NJ or PA for a pack of smokes.
Better yet, organize a couple of you and your friends to start a black market. Sure it’s illegal but it’s cheaper. In addition, you would be a hero, you wouldn’t let the government steal $2.75 from thousands of smokers.
One of today’s opinions published in the WSJ deals with exactly what I described above, government’s evil action forces markets to find illegal alternatives to keep consumers happy.
While the problem first surfaced during the Great Depression, tax hikes in the early 1960s created a major profit opportunity for smugglers and kicked the epidemic into high gear. By 1967, a quarter of the cigarettes consumed in the Empire State were bootlegged. New York City’s finance administrator labeled cigarette smuggling the “principal stoking facility of the engine of organized crime.”
Crime rapidly spread beyond New York’s borders, as trucks carrying cigarettes across the country were hijacked and businesses selling them robbed to supply New York’s black market. In 1972, the chairman of a New York commission told Congress that retailers and other workers were “confronted almost daily with the risk and dangers of personal violence which are now inherent in their industry.”
[...] Brian Balfour wrote an interesting post today onHere’s a quick excerptNY’s new governor recently approved a new tax of $1.25 on cigarettes. This is on top of its existing tax, $1.50. The government is making smoking unaffordable, so be prepared to drive to NJ or PA for a pack of smokes. … [...]
Pigovian taxes are quite popular nowadays, thanks in particular to Harvard economist Greg Mankiw. He argues the US should increase its tax on carbon — note, gasoline — because of the negative externatalities burning carbon produces.
I agree with Mankiw, as do many libertarians. See Pigou Club: http://en.wikipedia.org/wiki/Pigou_Club
So, why not apply this same logic to cigarettes? Right? Economics tells us to tax the bad and subsidize the good.
In fact, Nicholas Kristoff has argued in his New York Times column that “One of the most successful health measures this country has ever taken was the cigarette tax.”
He uses this logic to advocate a tax on soda. We can extend it to a tax on Doritos, or TV, video games, etc.
Is this where Greg Mankiw’s logic leads?
No. There is a fundamental difference between the carbon tax and the cigarette — or sin — tax.
The carbon tax is a true Pigovian tax, meaning it corrects for negative externalties. That is, it protects innocent people from the actions of others.
By contrast, a sin tax protets individuals from themselves.
Libertarians — who believe in personal responsibility as well as personal freedom — should find no problem with endorsing a tax on gasoline while opposing a tax on cigarettes.
[...] Continue Reading [...]
The mob must have pretty good lobbyists in Albany.
Cigarettes are inelastic goods. That means that an increase in their price or taxes will do little to dissuade people from buying them. This extra $1.25 per pack just increases the government’s smoking tax revenues by almost 100%. This simply means more programs and more spending–a dependable government revenue source.
Oh, and for the record: gas is pretty inelastic too.
[...] makes an excellent point in his comments to Liberty Girl’s post on the cigarette tax. He uses price elasticity to suggest I’m wrong to advocate on behalf of [...]
The problem with using the negative externalities argument to advocate a carbon tax (the fact that carbon isn’t a pollutant and that we produce a very negligible amount of it aside) is that such taxes don’t internalize the costs. Unless the government is using the tax revenue to construct giant carbon scrubbers throughout the country this tax does nothing to internalize the problems associated with driving; much like cigarette taxes it is a revenue device that is not really intended to address the externalities problem.
The argument could be made that the revenue is used to protect or relocate coastal or other populations effected by climate change. However, this is not addressing the externalities of pollution; it is addressing the negative externality of people choosing to live in areas where nature is telling them they shouldn’t live (think N.O.,LA).
I am not arguing against gas taxes as such; for to the extent that the revenue goes to fund roads these taxes do a great job of internalizing costs. However, I really don’t think that a carbon tax can possibly address the negative externalities problem associated with transportation. Taking money away from people and giving it to the government (the largest single polluter around–think tanks, humvees, jet fighters, Al Gore and cop cars all belching pollution vs. me and my Honda) does nothing to mitigate the amount of pollution that is produced.
WIRED has an interesting series of articles on 10 environmental “heresies” this week (http://www.wired.com/science/planetearth/magazine/16-06/ff_heresies_intro) . One of them has to do with carbon trading and opines that higher taxes are the way to go: http://www.wired.com/science/planetearth/magazine/16-06/ff_heresies_07trading