Tuesday, September 21, 2010

It IS possible to tax your way into prosperity!! No, really it is! See enclosed to find out...

    Well, it only works if you are a criminal or an organized crime figure.  Get your state legislature to enact high taxes on a product that is legal, but people just have to have.  Tell the legislators that it is good for the people AND it will raise LOTS of money for the state government.  Then you smuggle the product into the state and sell it for less than any business can sell it for because of the high taxes that the store must collect. Obviously this outcome was not the intention of lawmakers, but it is one of the "unintended consequences" that Frederic Bastiat warned would emerge from the "bad economist". I am certain Bastiat was not actually referring to economists, but politicians who played one on the floor of the legislature. I have no problem with taxing cigarettes, BUT the rate of taxation has to be rationally determined not just for the revenue it might raise, but for the additional PREDICTABLE results such as the one described below. 

Trade In Black-Market Cigarettes: Hot, Dangerous

Black-market cigarettes are costing many states hundreds of millions of dollars a year in lost tax revenue. And the lucrative, illicit trade is attracting violent criminal gangs that can be lethally ruthless.
Criminals buy cigarettes in bulk, in states with relatively low taxes such as Virginia or North Carolina. They load the cigarettes into tractor-trailers or rented trucks and drive them north, for example, to New York. They follow the same routes they would use to traffic illegal drugs.

Police say a carton that costs less than $40 including tax in a store in Virginia goes for more than $100 in a store in New York City.

Because of high taxes in the city, selling contraband cigarettes at rates even slightly lower than their value in the store can mean big money for criminals.

"They can be sold from ... the back of a van on the corner. They can be brought in through big trucks across the border and taken to warehouses and distributed from there," Gore says

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