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Chicago’s Sky-High Tobacco Tax Creates a Huge Black Market.

Written by Gary North on November 14, 2013

Chicago’s politicians love to tax the poor, the addicted, and the politically helpless.

Politicians see that poor people are addicted to tobacco. They take advantage of this. They tax tobacco, which means they tax tobacco users.

A tobacco tax is a sales tax. A sales tax is a so-called regressive tax: a fixed rate. Liberals say they hate regressive taxes. They love “progressive” taxes: higher rates on the rich. But that doesn’t stop them from voting for flat taxes, such as Social Security, FICA taxes, liquor taxes, and especially tobacco taxes. They may hate regressive taxes deep down in their hearts, but they vote for them every time.

The free market then responds. Tobacco importers rent 18-wheelers and drive to tobacco-growing states — recipients of federal tobacco subsidies — that have very low taxes on tobacco. They load up these low-tax products. Then they drive to Chicago. They sell the tobacco at below-market prices. Cigarettes are especially profitable.

This is not regarded by politicians as the free market at work — a tax revolt by the little people. They see this as a crime. They label this market as a black market. In Cook County, it really is. Blacks are the primary targets. They know it. The politicians know it. The media ignore it.

A local ABC-TV reporter says that “taxpayers are losing millions.” On the contrary, tax collectors are losing millions. Taxpayers are saving millions.

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9 thoughts on “Chicago’s Sky-High Tobacco Tax Creates a Huge Black Market.

  1. Akin to the prohibition of alcohol, high taxation of tobacco under the guise of reducing peoples' use is as useless. During the days of prohibition, alcohol drinking did not subside, but instead became a huge and dangerous black market activity. Rampant mob crime, smuggling, hidden drinking establishments, and price gouging were the results of an an unpopular law. The use of tobacco is no different, and increasing taxation will likely bring the same negative results. Liquor laws don't work, drug laws are similarly ineffective, smoking-age laws don't work, even major crime has not ceased to exist because of legislation. It is futile to legislate behavior.

  2. Phillip the Bruce says:

    Au contraire, it is only behavior that can be legislated. Thoughts and beliefs cannot be legislated, and if those are in opposition to the behavior that has been legislated, people may decide to take the risk of lawbreaking.

  3. You missed the point of the taxes. Government officials SAY that the taxes are to deal with community health issues. If that were true, then why not ban cigarettes? That will never happen. Can you imagine the PANIC in city government were they to suddenly lose that revenue?

  4. Same thing prevails with firearms.

    The Daley Machine bans private gun ownership. People who want self defense find substitutes.

    Besides, those kids who sell "drugs" would be glad to sell cigarettes too.

  5. Back in the early days of Arizona's tobacco tax leap (for the children, y'know), kids would pull grab'n'goes at the convenience stores. They would grab as many cartons as they could hold, and scram. Best part: The next day, the same kids would be back at the same store, out at the gas pumps, selling the smokes, by the pack, for less than the store was charging. Easy money.
    They've since moved all tobacco products behind the counters. For the children, right? Heh.

  6. a truly free market works. Every time. So, Chicago want to raise the price of a good (cigarattes). Fine. Someone else can figure out a way to deliver the identical product for a lower price. Someone else will sell more of the product at that price.

    I love Thomas Sowell's definition of price: price is the means of allocating the distribution of scarce resources that have alternative use". Dollars are "scarce resources" that have myriad "alternate use". Thus, if one source offers cigarattes for one rate of exchange in dollars, and another source offers the same cigarretes at a lesser rate of exchange for the same unit, that is, dollars, those who have dollars to sell will obviously sell them to the place that offers them the same product for fewer of those "scarce resources that have alternate use". Because, obviously, those with the dollars ALWAYS have "alternate uses" for as many of them as they can keep available.

    then, there is always Laffer's Curve…. raise tax revenue some, revenue increases. Raise taxes a bit more, reveue increases, but not quite so much as would expect. Raise taxes even more, revenue DECREASES as people modify their behaviour to pay less tax. Cigarettes in Chicago is a perfect example of both these above phenomena.

  7. The guy caught with 2,000 packs of cigarettes in his car can simply claim they were not for sale but personal use and the state has to prove otherwise.

  8. The problem with "morality" taxes and laws to suppress behavior is that there is always a social counter-effect.
    By driving distribution of booze, drugs and cigarettes underground, the authorities create new reasons for the formation of gangs. Its generally accepted that "Prohibition" and the "War on Drugs" led to the creation of the Mafia and the Drug cartels. Then we build up special police units and open new Federal agencies all designed to counter the effects of the effects. Taxing cigarettes just creates the environment for more of the same. We must be crazy!

  9. You people wanted a “king”. This is what a king will do.