New Op-Ed on California’s Prop. 86 Cigarette Tax Increase

October 12, 2006

Our chief economist Patrick Fleenor landed an op-ed in this morning’s San Diego Union-Tribune. The subject? Why California’s Prop. 86—which would raise their cigarette tax from 87 cents to $3.47 per pack, the highest in the nation—is likely to lead to bad social consequences, despite the best intentions of lawmakers. In particular, it’s likely to prompt a spike in cigarette smuggling and related crime in the Golden State. From the piece:

Smugglers and Thieves Await Passage of Prop 86Beginning in October 2000, three East County men went on a six-month crime spree, robbing at least 20 gas stations and convenience stores in the San Diego area. Armed with semi-automatic weapons, they burst in, assaulted clerks and customers, and cleaned the stores out of cigarettes.

Why did the thieves take cigarettes and not the Twinkies or the razor blades or just the cash?

The answer, of course, is taxes. Federal and state cigarette tax hikes have turned a pack of cigarettes into a gold mine for criminals, spawning a massive black market that makes it easy for thieves to quickly unload stolen cigarettes for cash.

The San Diego group’s luck ran out with an arrest in April 2001, but similar gangs across California and smugglers all over the world are eagerly awaiting a Yes on Proposition 86, which would double, triple or quadruple their profit margins.

In addition to encouraging theft, high cigarette taxes have led to staggering levels of cigarette smuggling into the state and casual tax evasion by consumers. The Board of Equalization has the tough assignment of enforcing cigarette taxes, and it admits that about 300 million untaxed packs are sold in California each year despite requiring elaborately printed tax stamps to be affixed to each pack.

When deciding whether to vote Yes on Proposition 86 to raise the state’s cigarette tax from 87 cents to $3.47, the nation’s highest rate, Californians should weigh the severe law enforcement problems that come with being the preferred destination of cigarette smugglers… (Read the full op-ed here.)

If you haven’t seen it already, be sure to check out Fleenor’s excellent new policy study on the likely consequences of the California tax increase, “California Schemin’: Cigarette Tax Evasion and Crime in the Golden State.”


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