While it's politically popular to impose confiscatory taxes on America's 40 million tobacco smokers, there are a number of consequences one might consider, but let's start out with a quiz. If a carton of cigarettes sells for $160 in New York City, and $35 in North Carolina, what do you predict will happen? If you answered tons of cigarettes will be going up I-95 from North Carolina to New York City, go to the head of the class.
Smuggling cigarettes is illegal; so the next quiz question is: Who is most likely to engage in cigarette smuggling? It's a mixed answer, but for the most part, organized smugglers will be people with a high disregard for the law. The Bureau of Alcohol, Tobacco, Firearms and Explosives, or ATF, has found that Russian, Armenian, Ukrainian, Chinese, Taiwanese and Middle Eastern (mainly Pakistani, Lebanese and Syrian) organized crime groups are highly involved in the trafficking of contraband and counterfeit cigarettes. What's worse is the ATF found that some of these groups use the money to provide material financial assistance to terrorist groups such as Hezbollah and Hamas.
Some smugglers are good people who differ little from the founders of our nation such as John Hancock, whose flamboyant signature graces our Declaration of Independence. The British had levied confiscatory taxes on molasses, and John Hancock smuggled an estimated 1.5 million gallons a year. His smuggling practices financed much of the resistance to British authority – so much so that the joke of the time was that "Sam Adams writes the letters (to newspapers) and John Hancock pays the postage." Like Hancock, some of today's cigarette smugglers are providing a service to their fellow man caught in the grip of confiscatory taxation.
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In my book, the Hancock-type smuggler is a hero of sorts. Let's look at it. During the days of the Soviet Union, Swiss watches were illegal. During our Prohibition era, the sale, manufacture and the importation of intoxicating liquor was illegal. Britain's Navigation Acts imposed high tariffs and restrictions on goods sold to the American colonies that ultimately led to our 1776 War of Independence. The common theme in all of these acts is government seeking to interfere with, regulate or outlaw peaceable voluntary exchange between individuals.
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Tell me what's wrong in people wanting to wear a Swiss watch, having a drink, purchasing tea from a Dutch seller rather than an English seller, or cheap cigarettes from North Carolina rather than expensive ones from New York. People in government or those in pursuit of a do-good agenda think they know better and think they have a right to use government's brute force to hinder peaceable voluntary exchange.
In comes my hero, the smuggler, to the rescue. He's the guy who, in effect, tells us, "I know the government wants to interfere with your consumption of booze, tobacco or tea, but I can get a deal for you." He might have to run clandestine operations, blackmail and corrupt public officials, but at least you get the item, if it has been prohibited, and for a lower price if it has been confiscatorily taxed.
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The smuggler who uses the proceeds to finance destructive activity is not my hero, but that is not an argument against the smuggling itself anymore than it would be an argument against the practice of medicine if some medical practitioners used their earnings to finance terrorist activities.
The easy solution to cigarette smuggling, and its attendant activities, is to eliminate the confiscatory taxes. Unfortunately, for politicians and do-gooders, the attack on smokers is a moral crusade that sees only benefits and costs are irrelevant. Or as novelist C.S. Lewis put it, "Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive."