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Effects of the Cigarette Tax: Smuggling to Internet Sales

Cigarette TaxesProposed budgets in many states across the country are bolstered by predicted income from cigarette taxes. In the past decade the price of a pack of cigarettes has risen almost 400%, mostly due to increased taxes by the federal government, and state governments. Are those predicted incomes a reality? Not nearly to the degree that officials hoped for, and not because they are doing the responsible, and healthy thing for the public either. Smokers aren't quitting: they're converting—to smugglers.

Can the painful economy, and the added burden of extraordinary tax rates make otherwise law abiding citizens turn to a life of crime? You betcha, but it's not really an overt act, most will reason away, barter, and justify their actions. Unfortunately for the misinformed and misguided, the law doesn't distinguish between smugglers who are professional criminals, and smugglers just looking to wrangle a few cheap packs of cigarettes for their own use: both are illegal.

What's The Proof that Taxes Have a Powerful Influence on Smuggling?

I mean, the state and federal governments have received increased revenues as a result of the tax impositions, right? Sure, but at the same time, studies show that retail sales have gone down dramatically after each hike in cost. So? Maybe all that hooha about being good for the public, and higher taxes encouraging smokers to quit is really true: eh, not really. Sure, some do quit as a result of feeling upset over being singled out for abuse. Quitting for any reason other than truly wanting to be free of the habit rarely works for long. Many return. However, this isn't an issue about quitting, it's about smuggling.

The high taxes make it hard for the poor to afford cigarettes, and makes it very uncomfortable for anyone else, so what happens? They look for alternative ways to get what they need without raping their wallets, or sticking up convenience stores and banks to get enough money to buy cigarettes. They look for deals online, they look for budget stores, and even street vendors, but they don't have to look far. Smugglers are waiting for them.

In fact, every time there are announcements of impending tax increases smugglers gear up for a boost in their business. According to a study published by the Dearborn Heights Times-Herald/Downriver Sunday Times, in Michigan, the tax rates and smuggling have a consistent and historical tie to each other. The study examines a 19 year period between 1990 and 2009 where both taxes, and smuggling have risen hand-in-hand and nose-to-nose from a roughly .70 tax rate and 15% smuggling rate to  where it is now, at $2.25 tax and 25% smuggling rate. The overlapping chart ties the growth of both at a nearly identical rate.

Who's Behind The Smuggling?

How does it happen, and who is responsible? Well, many of the smuggling culprits, as said earlier, are just everyday ordinary people who cross into neighboring states, or even Canada to find better prices, and carry their personal cargo back home with them. Or those same ordinary folks who shop online for overseas bargains.

Organized crime is always going to be present, too, when government steps in to control either by law or by cost, the habits of its citizens: see prohibition. The mafia has a powerful hand in the exportation of low-cost cigarettes. However, there is another culprit at work behind the scenes too: Big tobacco. The Campaign for Tobacco Free Kids produced a report showing how big tobacco companies such as R.J. Reynolds, in cooperation with British American Tobacco have involvement in smuggling their own brands into the use from Canada.

Victims of their Own Making

The government is also a victim of their own making. Duty-free laws make international smuggling an easy accomplishment. It also fuels the online market where shoppers can connect and purchase name brand cigarettes at rock bottom, untaxed prices.

Is it legal?

"Stateline," a website dedicated to state policy and Politics reports that by 2005, internet tobacco sales accounted for $5 billion throughout the nation. It's not exactly legal, but the penalties for personal smuggling at the moment are minor. It is a misdemeanor with no jail time, and a slap on the wrist fine of about $1,000. Law enforcement is working hard to get a handle on the problem, stating that it's more than just an economic dilemma; the fact that anyone can purchase cigarettes online, without proof of age, allows underage smokers to get cigarettes at reduced prices. Teens are buying cigarettes in record numbers.

The Globe is Getting Smaller

Cigarette TaxesIn 2011 it is getting harder to buy cigarettes online, and see a significant savings. New laws that prohibit the use of credit cards to buy cigarettes online, as well as tightened shipping controls have made online purchases much more difficult. Users are finding that prices do not end up being all that great once shipping is added. For the online consumer shipping charges are the new 'taxes' for the online tobacco industry.


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