Old story about tax rates and tax compliance

New York State recently sharply increased the excise tax on cigarettes. Can you guess what happened? Go ahead, guess.

The underground tobacco market is spreading like a fast-growing cancer in the wake of tax hikes that make New York cigarettes the most expensive in the nation -- and it's costing the state tens of millions a month in lost tax revenue, a Post analysis has found.

Illegal cigarettes are pouring into neighborhood bodegas by the truckload from neighboring Indian reservations, lower-tax states in the South and even as far away as China, authorities say. . . .

About 30 million packs are being sold legally each month -- down from 41 million packs a month before July.

The plunge far exceeds tobacco-control experts' predictions that sales would fall 8 to 10 percent, indicating that smokers are finding other means to get their nicotine fix.

In fact, the New York Association of Convenience Store Owners estimates that as many as half of all cigarettes consumed in the state lack proper tax stamps.

Comments

[Eric]

In my New York high school, our social studies teacher was teaching us about excise taxes and asked if anyone had a pack of cigarettes (adding that it was a filthy habit, so he covered himself on that). A student came running from the back of the room, shouting "I'll show you my Lark pack!" (Yes, I was in high school that long ago). The Lark pack had no excise stamp, so the lesson learned differed from that which was intended.

[jorgxmckie]

Well, the tax is apparently bringing in more revenue, but that is almost certainly offset by the criminality it encourages. I suppose politicians will never learn.

[Patrick R. Sullivan]

I see the potential for a movie. With John Garfield and Lizabeth Scott, maybe.

[Dotty]

A lot of academics would want to vet their source, along with the source's conclusions. But not ol' "Bowel Movement" Craig, whose notorious inability to parse complex information reeks as badly as his...

[Jack]

A great example to motivate the concept of price elasticity, which seems to always give undergrads a hard time, no matter how you present it to them. Thanks!