A recent study from the Tax Foundation and the Mackinac Center for Public Policy looking at cigarette taxes and cigarette smuggling reminds us, yet again, of how big government always ends up legislating the Law of Unintended Consequences.
Tax That Smoker Behind The Tree
You have to tax something to fund government, and if you’re taxing sales, cigarettes are as good a target as any: while legal, they’re universally known to be unhealthy and sometimes regarded as immoral. On the other hand, they’re also a predominantly American-made product that’s disproportionately consumed by lower-income Americans, meaning that a cigarette tax is more regressive than most taxes. In theory, the tax is supposed to serve the public health purpose of discouraging smoking; it’s refreshing to hear this argument from liberals who usually deny that taxes discourage behavior, but in practice, it takes a lot more taxing to discourage smoking than most other activities because people are physically addicted to the product.
This is to say nothing of the concern that state governments themselves get more or less addicted to tobacco revenues.
We know from long experience that when you ban something there’s a public demand for, it gets less common, more expensive and more under the control of the criminal class – but it doesn’t go away entirely. That’s true whether you are talking about cigarettes, guns, alcohol, drugs, gambling, abortion, prostitution, pornography, or illegal immigration. And what’s true of outright bans can be true as well of activities that are heavily taxed or regulated: the more costs government imposes, the more you get black markets. And that’s exactly where we stand today with cigarette taxes.