High cigarette taxes won’t work in Pennsylvania: too many roads

From: The Morning Call

Paul Carpenter

There was good news a couple of days ago for Kiwi smokers. A plan to increase cigarette prices to $100 a pack ($75 U.S.) has been scrapped, and they will have to pay only $20 a pack ($15 U.S.) by 2016.

New Zealand, already with some of the highest prices in the world, has drastically reduced smoking, from 30 percent of adults in 1986 to about 20 percent now, and officials hope to completely eliminate the filthy habit by 2025.

(My libertarian bent prevents me from supporting busybody restrictions on any personal behavior, but if I had to choose between a ban on marijuana or cigarettes, I’d go for the latter. I don’t care for either weed, but pot smoke smells better.)

Anyway, New Zealand also has taken other anti-smoking steps, including smoke-free parks and college campuses, and soon will bar retailers from openly displaying cigarettes; they’ll have to keep them hidden below counters, as if there is something disgusting about them, which, of course, there is.

There was one sour note about the Kiwi anti-smoking crusades, The Associated Press reported. The British American Tobacco Co. warned of a black market. “Consumer demand is far better served by legitimate companies than by illegal operators that will surely grow as the government makes it increasingly difficult for people to buy their products,” a company official said.

I have made a similar point when Pennsylvania’s government officials have tried to curb smoking by raising taxes. There is, however, an important difference between Pennsylvania and New Zealand.

We have oodles of roads that trucks can use to smuggle contraband cigarettes from low-tax states. Kiwi smugglers would have to equip their trucks with pontoons.
One of the sweetest moments in my journalistic career was when my stories about a gigantic cigarette smuggling operation caused a major upheaval in Harrisburg.
With the help of then-state Revenue Secretary Milt Lopus, the only member of Gov. Shapp’s cabinet I trusted, I revealed how the Mafia and crooked state officials worked together to import untaxed cigarettes from the South, affix phony state tax stamps, and sell them at fantastic profits.
I don’t know if there are similar schemes today, but I can tell you that the tax per pack goes as low as 30 cents in Virginia. In Pennsylvania, it went from 2 cents a pack in 1935 (implemented as a “temporary” emergency measure), to 18 cents by 1970, to a dollar by 2002, to $1.60 now. With 60 cartons in a case and 800 cases per truck, the tax gap now means a profit of more than $600,000 on a single truckload of swag.
Higher state taxes on cigarettes, I have argued, have only one real result — bigger profits for the mobsters and the authorities who are in cahoots with them. That is the main reason, I have cynically concluded, state officials keep raising the tax.
That’s not the only financial problem.
When politicians were pressured to do something about the deadly consequences of smoking (and the tobacco industry’s gleeful exploitation of the addictions it orchestrated), they conspired with hordes of lawyers to come up with the “Tobacco Master Settlement Agreement” of 1998.
The MSA provided that the industry compensate its victims by paying a minimum of $206 billion over the next 25 years.
As I’ve pointed out before, however, not a dime of that money has gone to a single victim. All of it went to the lawyers and to the government bureaucrats who divvied up what was left over after the lawyers took their multibillion-dollar shares.
The bureaucrats argued that their cut of the loot helped finance good causes, such as health insurance for the wheezing victims of the tobacco companies, when the victims could not qualify for Medicaid.
That lie was exposed last year (with little response by the news media) by Pennsylvania Auditor General Jack Wagner, who divulged that “$1.34 billion in tobacco settlement funds have already been quietly diverted from the uses originally intended.”
He said more than 40,000 Pennsylvanians lost the health coverage they were promised “when the state shuttered the program” and diverted hundreds of millions of dollars “to the general fund for unspecified purposes.”

Wagner urged Gov. Tom Corbett to restore the tobacco funds. “The mishandling of tobacco settlement funds is yet another example of how the state’s dysfunctional budgetary process is negatively impacting the lives of Pennsylvanians,” he said. (I checked with Wagner’s office on Friday, and there has been no sign that the illegally diverted money will be restored.)
A final note on the cigarette problem:

While I do not support busybody intrusions or draconian taxes, I do think there could be a simple solution to one problem. Cigarettes, now that most have filters, represent the worst litter of all.

Every sidewalk of nearly every town in the state has repulsive accumulations of the things, which could be eliminated by imposing a mandatory deposit fee for each filter. Smokers would pay, say, a dollar per cigarette filter, which then would be returned when they turned in the used filters to buy a new pack.

The tobacco industry and stores that peddle cigarettes might not like my idea, but it would clean up our environment.


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