Absurd Cigarette Taxes Create Huge Profit Center--But Not Just For Mobsters

This is one issue that makes my blood boil and has turned my indifference toward politics toward a rather strong dislike aimed at the politicians who run this state and created those cigarette tax hikes. In New York, the cigarette tax is up to $4.35. For comparison, according to an article on CNBC.com written by Brian A. Shactmann, Missouri's state cigarette tax is 17 cents.

Each state sets its own rate, and the disparity is huge, which I didn't need CNBC to point out to me.

Sharp readers of this site see where this is going -- New York state has opened wide a massive door through which organized crime is making a fortune selling bootleg cigarettes courtesy of a former-former governor of this state.
Said the article, "According to the Bureau of Alcohol, Tobacco and Firearms, the United States loses $5 billion in tax revenue every year from the trafficking of illegal cigarettes. Worldwide, it's a $100 billion problem, and it's the No. 1 economic crime in Europe.

"We liken it to the new prohibition era," Special Agent Ashan Benedict told CNBC for an upcoming documentary Cigarette Wars. "We haven't outlawed cigarettes yet, but it's taxed to the point where the criminals know they make a lot of money trafficking." We all know what this country reaped during those wonderful years of prohibition; it helped strengthen the Mafia for one thing.

The crime has several variations, but it's extremely simple. The most common way: Buy cigarettes in a low-tax state and sell them in a high tax state. The tax disparity is straight profit.

"A carton of cigarettes in Virginia is $30," Benedict said. "In New York City, it can be $90 or more. That's just one carton.

"You start dealing with hundreds and hundreds of cartons, and folks are making more money selling cigarettes up north than drugs."

One truckload can translate into $1 million in cash.

This is an historical mafia racket--and is indeed the proverbial "victimless crime," in every syllable of the phrase as far as I am concerned.. But, one thing does bother me. The world has changed since 2001, we have to remember, and the criminals now benefiting from the cigarette racket are believed to include terrorist groups. There are cases of illegal cigarette sales with ties to groups like Hezbollah and the Irish Republican Army.

Nice going, New York, fill their pockets with cash by taxing cigarettes as much as you can. Every extra penny they earn can go into that giant plastic bottle with the handwritten sticker on it: "Dirty Bomb," in Arabic. Good going, hope you all disappear into retirement and are never seen or heard from again. (I can always hope...)

Let's go back to the article: "We have made cases, notably, the Charlotte Hezbollah case, where a cell out of Lebanon was trafficking cigarettes from North Carolina (a low-tax state) to Michigan (a high-tax state)," said Jeff Cohen, a lawyer for the ATF. 

Hear that?  I'll repeat it: "They were using the proceeds to buy military armaments in Lebanon."

"The organizations are much more complex involving cigarette trafficking," Cohen said in the article.

With so many people unemployed, the economy still in the tank, and prices at the pump steadily going up, smokers are paying a fortune just to light up. So quit, do I hear someone say? How about this: I would if I could but am currently going through the most stressful period of my life right now, and frankly, I enjoy inhaling on a nice filtered Camel Wide, brown box. Instead of retroactively punishing smokers, tobacco should never have been put on the market in the first place -- or they should have just taken it off. But then the cash flow from the tax, at least the cash flow left after the criminals get through with the business, would have been shut off. The taxes the state does get its hands on, what exactly is it doing with that revenue, I wonder...

Cigarette Wars premieres Wednesday, March 2 at 9pm EST on CNBC.

Comments

  1. While you're worrying about where the cigarette tax revenue goes, wonder where all the state run gambling proceeds goes. They locked guys up and strongarmed them out of the gambling business then got voters to okay their taking it over because it was supposed to benefit education. Voters got snookered. See many smart kids around lately?

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  2. I have been bitching about the NY State cigarette taxes for years -- Bloomberg started this crap in the city and the fool Pataki took his lead in state. It now costs $10 to buy a pack of cigs in New York, but outside NYC; inside NYC, it'll run you about $12. So that is an especially sore spot for me. But you can even take it a step further, like you say. In many ways, the government and banks have forced the Mafia out not with laws but by co-opting their cash cows. The lottery tickets -- and how about those scratch offs people buy by the handful -- like you mentioned, are one thing -- that money goes to "running the government," meaning right in the pockets of mayors, commissioners, congressmen, etc., nowhere near schools. Ever have to pay $3 to use an ATM machine? What about the interest rate credit cards are allowed to charge you, and the repercussions if, God help you, you are late with a payment, then they raise your "vig" even higher, and on top of that charge you all kinds of penalties. I'd rather get a leg broken in this economy. Talk about shylocks.

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