How Taxation Creates Black Markets and Human Suffering

Many people believe that the primary function of government is to fight crime. However, there are many instances in which it does the exact opposite, enabling and creating criminal activity through ineptitude or hubris. By now, it’s pretty clear to almost everybody (a few surviving members of the Prohibition Party excluded) that the surge of organized crime in the 1920s was a direct result of the government’s efforts to ban the sale and consumption of alcoholic drinks. When unable to engage in their vice of choice legally, people turn to the black market, and bad things happen.

The principle still holds true today, even for less obvious interventions than an outright ban. High taxes on cigarettes have been fostering criminal enterprise in some states, often with tragic consequences.

A recent study found that, following an increase in cigarette taxes from $2.51 a pack to $3.51 a pack, illegal cigarette smuggling as a percentage of total cigarettes consumed in Massachusetts from 12 percent to 29.3 percent, the highest one-year increase in any state. This is not surprising to anyone who understands markets and human behavior.

Governments levy taxes on cigarettes because meddling do-gooders want people to smoke less (and also as an easy way to collect revenue, but let’s leave that alone for now.) But people who smoke like to smoke. They’re not going to stop just because they’re told to. Faced with higher prices, they will try to find a way to satisfy their desires at a lower cost. Smugglers recognize this and take advantage of it, by importing cigarettes from other states where the taxes are lower, undercutting legal sellers in their home state, and making a killing.

So what’s the problem? Smokers get their cigarettes, and entrepreneurial smugglers get to make a good living while circumventing the tax man. Sounds like a win-win to me. But there’s a problem with this arrangement, and, unfortunately, it’s a rather big one.

When people can’t do what they want in public, they choose instead to do it in secret. When things are done in secret, as in the case of a black market, it opens the door to all sorts of negative consequences.

Smuggling rings not under public scrutiny can abuse their workers, and since their activities are illegal, there is no option to go to the police to report bad actors. Without an official dispute resolution mechanism, people turn to violence. If a cigarette smuggler is trying to collect money he is owed, small claims court is not an option, but collection via knives and guns is. Of course, there’s also the violence that results from official efforts to shut down smugglers, putting police in danger as well as the illicit sellers.

Massachusetts is not alone in facing this problem. In New York, where the cigarette taxes are famously high, police busted a ring of Chinese smugglers who had been bringing in more than 2 million out-of-state cigarettes every week, buying them in low-tax states, strapping them under buses, and driving them into the city. Chinatown in New York and Boston have been uncovered as hotbeds of human trafficking and prostitution. This lucrative underground business is an opportunity for funding monstrous breaches of human rights, funding that would not be available if cigarette taxes were lower.

Liberals need to understand is that their good intentioned desires, their attempts to make the public healthier — when imposed on an unwilling public by the force of law — only result in greater suffering. I have far more sympathy for the victim of human trafficking, enslaved through no fault of his own, than for the cigarette addict smoking himself to death. We can’t save the latter unless he chooses to save himself, but by not prohibiting vices or taxing them excessively, we might still be able to help the former.

This article originally appeared on Conservative Review.

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Free the People publishes opinion-based articles from contributing writers. The opinions and ideas expressed do not always reflect the opinions and ideas that Free the People endorses. We believe in free speech, and in providing a platform for open dialog. Feel free to leave a comment!

Logan Albright

Logan Albright is the Head Writer and Sound Engineer at Free the People. He is the author of Conform or Be Cast Out: The (Literal) Demonization of Nonconformists and Our Servants, Our Masters: How Control Masquerades as Assistance.

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