New report shows why Congress’ plan to raise tobacco and nicotine taxes is such a terrible idea

Don’t be surprised that criminal enterprises see the greatest benefit.

Congress is currently considering a increased federal taxes on tobacco and nicotine products, is part of the President Bidenagenda “Build back better”. However, a new report illustrate why this is a bad idea.

Commissioned by the nonpartisan Tax Foundation, the study analyzes past tobacco tax hikes and shows how they have helped fuel the black market. Using data from the Mackinac Center for Public Policy, Tax Foundation expert Ulrik Boesen shows that as these taxes increase, so does illegal smuggling and black market activity.

There is a lot of data to examine. The report notes that 39 states and Washington, DC have increased tobacco taxes since 2006.

With smoking increasingly falling out of favor due to its more known health risks, smokers – despite their disproportionately low incomes – have become easy targets for tax increases. punishment.

Boesen found that as a result of these tax increases, black market criminal activity has increased in many of the hardest-hit areas.

New YorkFor example, there is the highest rate of tobacco smuggling with more than 52% of tobacco consumed coming from the state illegally.

Next is California, with 43% of tobacco consumption coming from smuggling activities.

And states like New Hampshire with low taxes on nicotine products see a large amount of smuggling from abroad to nearby high tax states, Boesen reports.

So Oklahoma also raised the tobacco tax in 2018 and immediately saw a dizzying increase in smudging from the input — jumping from 30th to 17th on the list of states with the most tobacco. most pirated.

Overall, there is a clear and strong correlation between tax rates and black market activity, as shown in Fig. graph below:

Suffice it to say that this is not a good thing. Black markets promote criminal activity and lack the accountability and quality standards of the legal, free market. But the promotion of the black market is just another undesirable consequence of large government intervention in legitimate markets.

“The formulation of tax policy can never be separated from an understanding of the law of unintended consequences, but it is often overlooked or misunderstood in political debates,” says Boesen. conclude. “Sometimes policies, while well-intentioned, have unintended consequences that outweigh their benefits.”

I call it an understatement. And it’s hard to imagine a better example of nicotine products demonstrating this principle. If the federal government raises the nicotine tax just to squeeze a few billion more working-class tax dollars to waste, don’t be surprised that criminal enterprises see the greatest benefit.

Brad Polumbo
Brad Polumbo

Brad Polumbo (@Brad_Polumbo) is a conservative liberal journalist and Policy Correspondent at the Foundation for Economic Education.

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https://www.tampafp.com/new-report-shows-why-congresss-plan-to-raise-cigarette-and-nicotine-taxes-is-such-a-terrible-idea/ New report shows why Congress’ plan to raise tobacco and nicotine taxes is such a terrible idea


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