One of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because...
- The Tax Policy Blog
- Tax Foundation Cigarette Tax Op-Ed in Wall Street Journal
Tax Foundation Cigarette Tax Op-Ed in Wall Street Journal
An op-ed by Tax Foundation chief economist Patrick Fleenor appeared in the Wall Street Journal today. The op-ed, "Cigarette Taxes Are Fueling Organized Crime," discusses the damage inflicted on society by high cigarette taxes, which often cause consumers to turn to the black market. The amount of criminal activity related to cigarette taxes is staggering, as Fleenor explains:
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."
State and city officials responded with mandatory prison sentences and expanded police powers of search and seizure. But in 1973 a state commission found the crackdown to be "completely ineffective and a failure." Desperate state officials formed a special task force that proposed abolishing the city's cigarette excise. Gov. Malcolm Wilson embraced the idea, explaining: "One major incentive to organized crime is the high New York City cigarette taxes, piled on top of the state tax, which have made that city the promised land for cigarette bootleggers."
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.