High Taxes = High Profits for Smugglers

FEBRUARY 25, 2010 E-MAIL THIS PRINTER FRIENDLY

That Vinny DeMarco is a clever one. In a recent letter to the Baltimore Sun, the self-appointed public health advocate praised the fact that Republican members of the General Assembly did not call for a repeal of the $1 cigarette tax hike (enacted in 2007) as part of their deficit reduction plan. DeMarco claimed that "it saved many lives by reducing the number of packs of cigarettes sold in Maryland by over 73 million..." Notice the clever wording: "reducing the number of cigarettes sold". Could it be that Mr. DeMarco now realizes that this tax hike has not only reduced the number of smokers in the state (as it probably has) but it has also increased cigarette smuggling?

In January, Baltimore Sun columnist Jay Hancock raised this issue:

Tobacco-smuggling busts roughly tripled in the first fiscal year after Maryland's tax went from $1 to $2 a pack. They're on track to equal those levels again this year, but traffickers nailed by tobacco-enforcement agents are probably only a teeny portion of what goes on.

Maryland may be No. 1 in the country in cigarette smuggling, according to calculations by Michigan's Mackinac Center for Public Policy, a pro-markets think tank.

Hard data on smuggling are nonexistent because so much is undetected. But Mackinac researchers compared legal cigarette sales with each state's actual level of smoking as shown by federal health surveys. The difference was probably smuggling.

Back then, DeMarco was singing a different tune:

People who supported the tax increase cheer what looks like an amazing plunge in Maryland smoking. But they're looking only at official figures.

"This shows that the dollar tax increase did exactly what public health advocates predicted," Vincent DeMarco, president of the Maryland Citizens' Health Initiative, said a few months ago.

Come on, Vinny. Legal sales have plunged because smokers and smugglers save $17 a carton by driving south and loading up the trunk.

In 2007, I predicted cigarette smuggling would increase out if this tax were raised. I'm glad to see that even Vinny DeMarco has come to see realize this inescapable fact.

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