Tuesday, March 15, 2005
Smoking Guns and Smoking Smokers
Even in today's politically correct history curriculum students are instructed that one of the terrible by-products of the Prohibition era was the rise in violent mob crime. Unfortunately, today's legislators and many health nuts and moralists have conveniently blocked out of their collective mind the idea that black markets will arise to satisfy markets that are being taxed to death or are prohibited. In the name of health, many states are trying to make the cost of smoking prohibitive. The dangerous result may be a rise in violent crime in the States and terrorism both home and abroad. Additionally, many states are taking the oddly opposite postion of protecting big tobacco in order to keep the large cash payments flowing into state coffers. The confusions is maddening.
William Billingslea, a senior intelligence analyst for the Office of Strategic Intelligence and Information in the Bureau of Alcohol, Tobacco, Firearms, and Explosives in Washington, D.C. states: "Illicit cigarette trafficking now rivals drug trafficking as the method of choice to fill the bank account off terrorists. Each state that raises its cigarette taxes is a new prospect for illicit profits gained by trafficking in cigarettes. Raising the tax on cigarettes sidens the difference between wholesale and retail price and inadvertently creates the opportunity for traffickers, who evade the tax and gain the profits. Cigarette traffickers can make as much as $60 per carton. The illicit sale of cigarettes and other commodities by terrorist groups and their supporters has become a crucial part of their funding activities"
According to Steve Geissinger's article (linked above), Democratic legislators from Los Angeles and the San Francisco Bay Area are pushing three bills to hike cigarette costs to pay for littler cleanup or ease deficit pressures (Assemlblywoman Fran Pavley, D-Woodland Hills, and Senators Tom Torlakson, D-Antioch, and Wes Chesbro, D-Arcata).
Of course, bad government ideas motivated by Big Government greed are not confined to simple tax rates on packs of cigarettes. The February 28, 2005 issue of Forbes has an article entitled "Trustbuster" by Scott Wooley which shows the lengths to which the attorney generals and legislators will go to protect their cigarette slush fund created by the big anti-tobacco settlement of as few years ago.
"The settlement took hold in November 1998, and the giants instantly raised prices by 45 cents a pack, this at a time when Marlboros retailed for about two bucks a pack. That was enough to cover payments to the states and then some, but the big brands continued with a spree of price hikes, up to 18 cents a pack the next year, then up 19 cents the year after that."
"The incessant price hikes created an opening for discounters, who spotted and then exploited a loophole in the fee rules (which governed the fees that big tobbacco had to pay to various state governments under the settlement)"
"In getting the four cigarette titatns to agree to pay the states princely sums, which would require price increases, the states agreed to help the big brands avoid getting undersold by discounters. They did so by requiring even new off-price brands to pay roughly the same level of fees (now about 40 cents per pack). The states were disarmingly transparent about their intent: to 'fully neturalize' the competitive advantage of the discounters, the settlement says."
So, what was the loophole?
"The settlement let (discounters and others) get refunds from states where they didn't do business, so a newcomer who sold cigarettes in, say, Virginia would get back 98% of the (cumulative) state imposed fees."
As you can probably guess, states have moved to close this loophole. The states are being challenged by the discounters in Federal Court and have received mixed results so far.
Of course, if you work for Weyco, Inc., you had better stop smoking altogether to save your job even if you only smoke outside of the workplace.
The anti-smokers have gone nuts (and, no, I don't smoke).
William Billingslea, a senior intelligence analyst for the Office of Strategic Intelligence and Information in the Bureau of Alcohol, Tobacco, Firearms, and Explosives in Washington, D.C. states: "Illicit cigarette trafficking now rivals drug trafficking as the method of choice to fill the bank account off terrorists. Each state that raises its cigarette taxes is a new prospect for illicit profits gained by trafficking in cigarettes. Raising the tax on cigarettes sidens the difference between wholesale and retail price and inadvertently creates the opportunity for traffickers, who evade the tax and gain the profits. Cigarette traffickers can make as much as $60 per carton. The illicit sale of cigarettes and other commodities by terrorist groups and their supporters has become a crucial part of their funding activities"
According to Steve Geissinger's article (linked above), Democratic legislators from Los Angeles and the San Francisco Bay Area are pushing three bills to hike cigarette costs to pay for littler cleanup or ease deficit pressures (Assemlblywoman Fran Pavley, D-Woodland Hills, and Senators Tom Torlakson, D-Antioch, and Wes Chesbro, D-Arcata).
Of course, bad government ideas motivated by Big Government greed are not confined to simple tax rates on packs of cigarettes. The February 28, 2005 issue of Forbes has an article entitled "Trustbuster" by Scott Wooley which shows the lengths to which the attorney generals and legislators will go to protect their cigarette slush fund created by the big anti-tobacco settlement of as few years ago.
"The settlement took hold in November 1998, and the giants instantly raised prices by 45 cents a pack, this at a time when Marlboros retailed for about two bucks a pack. That was enough to cover payments to the states and then some, but the big brands continued with a spree of price hikes, up to 18 cents a pack the next year, then up 19 cents the year after that."
"The incessant price hikes created an opening for discounters, who spotted and then exploited a loophole in the fee rules (which governed the fees that big tobbacco had to pay to various state governments under the settlement)"
"In getting the four cigarette titatns to agree to pay the states princely sums, which would require price increases, the states agreed to help the big brands avoid getting undersold by discounters. They did so by requiring even new off-price brands to pay roughly the same level of fees (now about 40 cents per pack). The states were disarmingly transparent about their intent: to 'fully neturalize' the competitive advantage of the discounters, the settlement says."
So, what was the loophole?
"The settlement let (discounters and others) get refunds from states where they didn't do business, so a newcomer who sold cigarettes in, say, Virginia would get back 98% of the (cumulative) state imposed fees."
As you can probably guess, states have moved to close this loophole. The states are being challenged by the discounters in Federal Court and have received mixed results so far.
Of course, if you work for Weyco, Inc., you had better stop smoking altogether to save your job even if you only smoke outside of the workplace.
The anti-smokers have gone nuts (and, no, I don't smoke).
