In this podcast, Mike LaFaive of the Mackinac Center for Public Policy discusses in greater detail his article on the Heartlander titled “A Tax Hike Al Capone Could Have Loved”. In his article, he compares Al Capone’s liquor smuggling incentives to the new increases in cigarette taxes proposed by Chicago Mayor Rahm Emanuel.
LaFaive describes the excessive taxes on cigarettes as “prohibition by price”, where the taxes are so high it creates an “implicit prohibition” of cigarettes. Recently, Mayor Rahm Emanuel proposed a new, $.75 tax increase on cigarettes, which would put Chicago the most expensive city for cigarettes in the entire country. LaFaive believes this would cause Chicago to become the number one cigarette smuggling state, and bump down New York, where 60% of all cigarettes in the state are smuggled.
Before the most recent tax increases, the University of Illinois did a study of cigarette smuggling in the city of Chicago, and found that 75% of the cigarettes were not from Chicago; in fact, 29% were from Indiana. The fact is that increases taxes on cigarettes only drives smokers to buy elsewhere and the city (or state) actually ends up losing tax revenue, when the goal was to increase it. It creates incentives for smugglers to buy cheap and sell high; profits are as good as smuggling drugs and the punishments are less severe.
It’s time to fight back against these detrimental tax policies. You can read more at the Mackinac Center website.
Listen to the podcast in the player above