“New York has a long, bloody history of cigarette tax evasion,” writes Patrick Fleenor of the Tax Foundation. “Serious problems began in the early 1960s, when tax hikes caused organized crime to ruthlessly push aside competitors and dominate the racket. By 1967, a quarter of the cigarettes consumed statewide were bootleg, and the problem was much worse in New York City.”
Meanwhile in Canada – where exorbitant taxes have pushed the price of brand-name cigarettes over $10 per pack – the purchase of contraband cigarettes doubled from 2007 to 2008.
As a result, Canadian authorities are also facing an increase in organized crime as well as fewer people giving up the habit thanks to the availability of cheaper cigarettes. Suggestions to lower taxes have fallen on deaf ears, however, and beginning on July 1, cigarette taxes in British Columbia will actually increase - to $60 on a $96 carton.
Once again, government is doing the same thing and expecting a different result – which of course is Einstein’s famous definition of insanity.
“Government policies should suppress crime, not encourage it,” Fleenor says. “Bootlegging could be eliminated overnight by relying on broad-based, low-rate taxes—such as those on income, property and sales - rather than on high taxes on easily transportable goods.”
Faced with clear and compelling evidence which proves conclusively that decades of tax hikes have only compounded the problems associated with contraband cigarettes, governments in Canada and the United States are continuing to pursue the same failed solutions. Rather than cutting taxes and let the marketplace do its job, they’re betting our money – and our safety – on an approach that they know doesn’t work.
The only question isn’t ‘when’ these tax hikes will fail, it’s how spectacularly and expensively they will fail – and how many lives will be lost in the process.
William Wilson is the President of Americans for Limited Government. He has spent his career working in political strategy and public affairs for various causes and organizations.