Jump to full article: Orlando (FL) Sentinel, 2009-03-04
Author: Michael D. Lafaive and Todd Nesbit * Special To The Sentinel March 4, 2009
Intro: The state of Florida is considering a cigarette tax hike of $1 per pack, a 295 percent increase. The Orlando Sentinel has opined in favor of such an increase without accounting for the smuggling it could encourage. Readers should be aware that increased cigarette taxes would likely produce a laundry list of such unintended consequences, including violence against people and property.
Last year, the Mackinac Center for Public Policy published a 90-page study titled "Cigarette Taxes and Smuggling." In the study, a statistical model was constructed to gauge the degree to which tax-induced cigarette smuggling occurred in the continental United States from 1990 to 2006. This model pegged Florida's total smuggling rate at a modest 5.8 percent of all cigarettes (legal and illegal) consumed in 2006. . . .
Florida's proposed cigarette excise tax would dramatically increase its tax differential with nearby tobacco states. It does not strain credulity to suggest that commercial smuggling from states such as South Carolina, which taxes cigarettes at 7 cents per pack and no longer mandates tax stamps, will increase dramatically. . . .
We have long argued against higher taxes and recommend cuts in states with cigarette excise taxes that are already high. Moreover, cigarette taxes are regressive, and cigarette tax revenues are frequently spent on items that have little to do with smoking cessation or other tobacco-related costs.
--Michael D. LaFaive is director of fiscal policy at the Mackinac Center for Public Policy, a research and educational institute in Midland, Mich. Todd Nesbit is a Penn State Erie economist and an adjunct scholar with the Mackinac Center.
The study also distinguished between casual and commercial smuggling.
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