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by Peter Moskos

October 17, 2014

Bootlegging: for cigarettes, alive and well in New York City

Story in the New York Times:
The toothpick pressed a hidden button that released a large magnet that kept a secret compartment locked. Deputy Davis lifted the front of the row of shelves like you would the trunk of a small car, and inside were rows and rows, all different brands, of contraband. Not narcotics or pills, but unopened packs of cigarettes, perfectly legal in the state in which they were bought, but not here. Hence the secret compartment.
The moral here is simple. You need some enforcers, but we shouldn't waste too many resources in regulating a legal product. When there's a huge market bootlegging, then you need to lower taxes.
Also, I suspect that smoking isn't down as much as people think as a result of raising taxes. Because if The Man can't find the cigarettes, than the public health expert things they aren't being smoked.

According to a great study by Klaus von Lampe (et al), my brilliant colleague:
It was found that 76% of cigarette packs collected [by looking at litter... how cool is that?] avoided the combined New York City and State tax. More specifically, 57.9% were untaxed (counterfeit or bearing no tax stamp), for 15.8% taxes were paid outside of New York City (including other states and New York State only). Only 19.4% of tax stamps collected indicated that New York City and New York State taxes were paid.... The finding that the majority of cigarettes did not have a tax stamp or bore a counterfeit tax stamp suggests that these cigarettes were being bootlegged, most likely from Native American Reservations. It was found that 76.2% of cigarette packs collected avoided the combined New York City and State tax.
And two words: Eric Garner.

5 comments:

Dave- IL said...

"When there's a huge market bootlegging, then you need to lower taxes."

Absolutely! I think of this every time I hear people say we should legalize marijuana and "tax the hell out of it." Well, no we shouldn't. If the goal is to minimize black market involvement, then you need to be very careful about leveling high "sin taxes"(which would be better labeled public health/safety taxes).

Anonymous said...

caffeine(coffee), corn syrup, and sugar are the most addictive consumer goods. At least one of them is highly subsidized.
why not tax them?

PCM said...

I would love to see a street-corner black market for high fructose corn syrup!

Anonymous said...

Interesting study. But note that it was done in a "socioeconomically deprived area" -- the South Bronx. I'd bet that in Manhattan there's be a somewhat higher percentage of taxed cigarettes.

Andrew C. Bairnsfather said...

"I would love to see a street-corner black market for high fructose corn syrup!"

Certainly would be a sticky situation. (drummer rimshot)

When I lived in Alabama and lived near the train tracks I would routinely see large cylindrical rail cars chained together with many other freight cars, and on them "Corn Syrup" or maybe High Fructose Corn Syrup. I could only imagine they were going to a Karo factory to fill bottles.

In related news here's a humor bit about sugar being made illegal. "Rock Candy" a National Menace