John Convery
LEO310
Times Topic Essay
Cigarette Smuggling
Introduction:
Government officials have made the strides to stop the illegal trafficking of
cigarettes. Cigarette Smuggling is a multibillion-dollar business that is taking money
away from the government and fueling organized crime and corruption all over the world.
Tobacco is the world’s most widely smuggled legal substance across any border. Many
factors contribute to the cause of cigarette smuggling. Those factors being high rates of
cigarette consumption, high tax rates on cigarettes, and high tax-induced cross-border
price differentials. All over the country, federal, state, and local governments tax tobacco.
Tobacco products are taxed in two ways the unit tax and valorem tax. The unit tax for
tobacco is the tax per pack of cigarettes. The valorem tax is based on a constant fraction
of either wholesale or retail price of cigarettes.
In 1921, Iowa became the first state to tax cigarettes; in 1969, North Carolina
was the last state to enact a cigarette tax. When tobacco, then became taxed many
consumers wanted to save money by avoiding taxes on tobacco. The suppliers then took
advantage of the easy border entry, high profit margins, and weak repercussions if caught.
Illegal cigarettes are priced much cheaper than legal cigarettes, and do not endure all of
the protocols that normal legal cigarettes do. Once governments saw a loss in tobacco tax
revenue over the years they then became suspicious of consumers and supplier’s illegally
selling or buying cigarettes.
Cigarette Smuggling Bill Signed
On March 26th, 1952 Governor Dewey in Albany, New York signed a bill to limit
the smuggling of untaxed cigarettes. After the bill was signed, the fines and penalties had
increased against those who violated cigarette tax laws. Cigarette smuggling during this
time wasn’t a booming business like it is today, it was just the start of something that
grew to become much larger. As mentioned earlier, there were bills that were passed on
cigarette taxes before 1952. It took many states a much longer time to enforce these taxes
on cigarettes.
