By Darren Smith, Weekend Contributor
With many states grappling with the need for tax revenue and the otherwise laudable effort to curtail cigarette smoking among their citizens, laws of supply and demand are beginning to having unexpected consequences to some. Rises in taxation of cigarettes with prices in one location as high as $15.00 per pack, the majority of cigarettes consumed by smokers there are now bootleg. According to the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives, nearly $5 billion in revenue in 2010 was lost because of smuggling. But this figure is very likely to rise dramatically since many states since enacted even higher levels of taxation.
The situation has formed a fertile ground for illegal cigarette trafficking and there have been inroads into organized crime. Sources of illegal cigarettes have been neighboring states where tax rates are lower, Native American reservations, and even foreign sources of the same brand names, often from Vietnam, Thailand, and Eastern Europe. Wholesale illegal supply chains are becoming increasingly significant. While cigarettes are otherwise available, albeit at a higher price, these states are beginning to see a softer form of prohibition. But there is also a very dark side to smoking bootleg cigarettes. Illegal cigarette trafficking has been used as a vehicle to channel money to foreign terrorist organizations. Are the benefits worth the costs inherited from high taxations?
According to the non-partisan research group Tax Foundation, increased excise taxes on cigarettes to discourage smoking have, in fact, created lucrative incentives for black market trafficking between states. According to their report, 56.9 percent of the cigarettes sold in the Empire State are brought in from other states. New York State has the highest cigarette taxes in the country – a whopping $4.35 a pack. If you live in New York City, it’s another $1.50 per pack, bringing taxes to $5.85 per pack, with the overall cost of a pack in the city in the $12 to $15 range.
Arizona is the country’s second largest net importer of smuggled smokes with 51.5 percent of its cigarettes smuggled in illegally. New Mexico follows at 48.1 percent, Washington at 48 percent and Wisconsin at 34.6 percent, according to the survey.
The states which had the highest outbound smuggling rates were New Hampshire at 24.2 percent, Wyoming at 22.3 percent, Idaho at 21.3 percent, Virginia at 21.2 percent and Delaware at 20.9 percent.
Enforcement is often lax and under-funded on the state and local level. Yet a semi-truckload of bootleg cigarettes can bring in nearly three million dollars in illicit profits. With easy availability on a wholesale level and unlike drugs such as heroin are a legal substance, it is often more attractive than drug or weapons smuggling.
It can be said that nearly all of the end users of these bootlegs are ordinary smokers who want to buy their product at a lower price, and they are not necessarily otherwise the stereotype of a contraband user, it is the supply side that is has a insidious nature. This is not limited to profiteers, but according to the BATFE and FBI reports, terrorism is now cashing in on the racket.
The first large-scale cigarette trafficking case tied to terrorism was prosecuted in North Carolina in 2002. A federal jury in Charlotte convicted Mohamad Hammoud, 28, of violating a ban on providing material support to terrorist groups by funneling profits from a multimillion-dollar cigarette-smuggling operation to Hezbollah.
The jury also found Hammoud, whom prosecutors described as the leader of a terrorist cell, and his brother guilty of cigarette smuggling, racketeering and money laundering. The two men, natives of Lebanon, were accused of smuggling at least $7.9 million worth of cigarettes out of North Carolina and selling them in Michigan. Hammoud was sentenced to 155 years in prison.
Prosecutors were able to prove that profits from the venture were funneled to high-ranking Hezbollah leaders. And Hammoud was caught on wiretaps speaking on the telephone with Hezbollah’s military commander in Lebanon, Sheik Abbas Harake, according to trial testimony.
In another case in September, Hassan Moussa Makki, 41, a key player in a multimillion-dollar interstate cigarette smuggling ring, pleaded guilty in Michigan to providing material support for terrorism and participating in a racketeering conspiracy. Prosecutors said he also funneled money to Hezbollah. Makki, a native of Lebanon, was one of 12 people indicted last year in the scheme to buy low-tax cigarettes in North Carolina and sell them in Michigan. He was sentenced to 57 months in prison.
While it is certainly unfair to label a tax evading smoker as an indirect supporter of terrorism and organized crime, most are probably unaware of this link. It is time for state legislatures to see beyond the current tax revenue addiction of tobacco and focus on alternative approaches.
By Darren Smith
The views expressed in this posting are the author’s alone and not those of the blog, the host, or other weekend bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.
29 thoughts on “The Smokeasy: Bootlegging Returns To America”
We can try to quit polluting the air all we want but until China, India and other countries do the same, we are going to still have a polluted earth. The problem lies within each country but we at some point will breathe some of the same air that other countries breathe, the wind still blows and pollution is not confined to one area. We get the ash from volcano’s, we get the same weather patterns that begin in other countries. America alone cannot clean up the air and I am tired of all the idiots that cannot think beyond our borders.
Cigarettes are not the cause of all lung disease or cancer. However no one ever needs to smoke and if they really want to quit, it depends on their determination and will power. You are in control of yourself only.
Smoke em if ya gottem Mike.
I live in LA. That brown layer over the city is not cigarette smoke. I am unable to quit. I’ve seen people on the street complain about cigarette smoke all the while car after car goes by. It’s the cats you idiots! Kids here in LA have high rates of lung illness. Oh the major source of air pollution here in CA is China. Stop all this whining about second hand smoke and do something about the real sources of air pollution!
Essentially, prohibition (drugs, tobacco,…) is not in our national security interest, our civil rights interest, or our budgetary interest with regard to incarceration and law enforcement. Prohibition appears itself to be corrupting and perhaps more dangerous than what it purports to address.
Anon: Our government does not tax Heoroin or however ya spull it. Nor crack. They are outlawed. Tobacco kills people. I would not tax it, I would outlaw it and stop the industry that lives off of it. Grow cotton.
after they take smoking away, what will they target next as being unhealthy and in need of a massive tax? chew on that
… The socialist/progressive side does not like to address these type facts and questions because it obviously contradicts their position. It is amazing how many of them derive their livelihood from taxation or other government sponsored and funded systems.
Church tithes don’t supply enough to keep them paid (MOMCOM – A Mean Welfare Queen), in our case better than (as VP Biden said in Poland recently) the next 10 nations (China, Russia, Britain, Germany, etc.) added together.
Christian soldiers gotta have weapons dood.
That takes taxes, not offerings.
Thank You samantha for all the excellent points you brought up.. i will only add this.. if smoking is so bad for those who smoke then why not go after the manufacturers? why go after the smokers? if they really wanted the people to stop smoking then they would shut down the companies that are manufacturing the tobacco, they would destroy the tobacco farms and warehouses. considering there is a depopulation plan in place there is no way in heck they want the people to stop smoking. i mean smoking is part of the plan to shorten the life spans of humanity…
a question i asked a non believer a week ago.. ” we have all this so called technology and medication that is supposed to extend our life spans right? so why exactly are we dying out at much earlier ages then our ancestors who had none of those things? im still waiting for a answer.
supposedly the purpose of the military is to fight for the people to keep a handle on the rights and freedoms we are born with. and yet according to the corporation formerly known as the government WE HAVE NO RIGHTS. and very little freedom… they have made up culpable in our enslavement. we pay money for everything and still get taxed. can anyone explain how and why that is? and please stop with the lie that our taxes pay for anything. except military weapons . we have billions to pay companies for consultations and yet are shutting down schools, food pantries, day cares etc. we have billions for military weapons and yet hospitals are shut down, etc etc the list goes on..
Robinh45 – all good points – The socialist/progressive side does not like to address these type facts and questions because it obviously contradicts their position. It is amazing how many of them derive their livelihood from taxation or other government sponsored and funded systems. A thief will never admit they are stilling.
Samantha wrote: But still, you have to recognize, according to my parents, that beer and wine were not household staples before the 90s.
They hung out in the wrong houses. My parents drank and always had been and booze in the house in the 1960s. As Ben Franklin said “Beer is proof God wants us to have fun”. Thomas Jefferson’s abodes, both here and abroad were known for their constant supply of wine.
Government will tax anything that they think the Citizens will let them get away with. With over 115 different taxing methods now in place, it shows me just how stupid Citizens are as they send their children off to endless wars.
What happens is that people are not that smart and we don’t promote and teach moderation.
The taverns are taxed so heavily that only the best locations can operate.
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