Reason Quotes LaFaive on Sin Taxes

Examining the unintended effects of cigarette taxes

Michael D. LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, has spent years studying the unintended effects of cigarette taxes. This week, he was quoted in an article for Reason looking at the overall impact of sin taxes.

It's "Prohibition by price," Michael LaFaive tells me. He's an economist with Michigan's Mackinac Center for Public Policy, which, among other things, studies the effects of skyrocketing cigarette taxes. And just as overt efforts to snatch booze from Americans spawned a dynamic and dangerous black market in smuggled liquor, his organization's research reveals that implicitly prohibitionist schemes to make tobacco unaffordable have already done the same.

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In New York, where authorities boasted just weeks ago of busting a $3 million smuggling ring, 58 percent of all cigarettes sold in the state are smuggled. With state taxes at $4.35 per pack, and New York City imposing another $1.50 charge, it's a no-brainer to load trucks at Virginia's $0.30 per pack rate and illegally drive them up Interstate 95 to customers suffering the country's most onerous tax.

The full article is available on Reason's website.

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