Funding terrorism

July 31, 2012

Free Market Foundation

High cigarette taxes are not just inefficient, argues Bruce Bartlett of the National Centre for Policy Analysis in the U.S.A. They also help fund illegal and deadly organisations.

Organised crime has been deeply involved in American interstate smuggling for decades. However, recent sharp increases in state cigarette taxes have increased its involvement. For example:

The Washington Post reported that Maryland’s cigarette tax hike from 66 cents to $1 led to an immediate jump in smuggling.

It also reported that “criminals who once dealt exclusively in illegal drugs are now smuggling cigarettes because it is so lucrative and punishment generally much less severe.”

A Detroit News story quoted John D’Angelo of the Bureau of Alcohol, Tobacco and Firearms as saying, “There is no doubt that there’s a direct relationship between the increase in a state’s tax to an increase in illegal trafficking.”

Nor is organised crime the only entity profiting from smuggling. Terrorists are getting into the game:

A member of Hezbollah was convicted in North Carolina of running a multimillion dollar cigarette smuggling operation out of that state.

When asked about similar activities in Maryland last year, State Comptroller William Donald Schaefer was quoted as saying, “We know that some of the money used by smugglers is directly passed on to terrorist organisations.”

On July 3, The Guardian, one of Britain’s leading newspapers, reported that the Irish Republican Army has now joined with organised crime to raise millions of pounds through cigarette smuggling.

Many believe that increased enforcement will solve the smuggling problem. But authorities cannot even keep cigarettes out of prisons. A ban on smoking in New York state prisons pushed the price of smuggled cigarettes to $7 to $10 each. Smuggling of methadone and heroin dropped, displaced by the more valuable tobacco.

Source: Bruce Bartlett, senior fellow, National Centre For Policy Analysis, August 7, 2002.

For more on Sin Taxes: http://www.ncpa.org/iss/tax

FMF Policy Bulletin\20 August 2002