The Fox affiliate in Washington, DC reports that over the weekend police in Upper Marlboro, Maryland (pretty ironic) intercepted a van hauling 300 cartons of cigarettes which had been purchased in Virginia. Authorities suspect that the cigarettes were bound for a high-taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. jurisdiction such as New York City or New Jersey.
The economics of so-called “buttlegging” are pretty straightforward. In Virginia the tax on cigarettes is 30 cents per pack, or $3.00 per carton. In New York City the tax is ten times that amount: $3.00 per pack or $30.00 per carton. This creates the situation where it is possible for smugglers to earn as much as $27.00 on every carton smuggled into the city, or $8,100 per 300 carton vanload. Not bad for a five hour drive. It’s no surprise that the Big Apple is awash in bootleg cigarettes.
Unfortunately, tax evasion is the least of the Big Apple’s problems when it comes to its illicit cigarette market. Over the years high taxes have spawned a wave of tobacco related crime that has included murder, kidnapping and armed robbery. Much of this crime has been aimed at ordinary citizens, such as shopkeepers, warehousemen and truck drivers.
In what is perhaps a strange irony to this story, Maryland too may soon be visited by many of these same problems. Legislators in the state house are considering hiking that state’s cigarette tax to $2.00 per pack. This would make it possible to earn $5,100 on each 300 carton vanload of cigarettes driven across the Potomac River.
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