Isn’t it interesting how every time a state government is in fiscal trouble that the first thing they decide to do is to raise taxes on the sale of tobacco?  Somehow, legislators have it in their heads that the only people who might be upset by raising the cost of tobacco are smokers.  And, since smoking is bad for smokers, and smokers shouldn’t be smoking anyway, maybe making smokes more expensive will dissuade smokers from smoking.

Of course, this is government we’re talking about.  So it never works out they way they think it will, no matter who tries to tell them.  In fact, this plan to raise revenue from tobacco taxes doesn’t actually work at all.

See, governments don’t understand free markets.  If you raise the price of a certain good or service beyond a certain point, people who want the product badly enough will find a way to procure it more cheaply.  Remember Prohibition? Same thing.  To avoid paying the higher taxes, they will cross state lines, buy from an Indian reservation, buy over the internet, or even resort to black market purchasing.

And, if raising taxes does actually cut down the number of smokers, then the expected revenue from this tax increase will be less than expected…because there will be fewer smokers!

(more…)

No fight, nor sovereign nation, is too small to find tax revenue:

On August 25 of this year, a federal-court judge in Brooklyn handed down a verdict addressing the Unkechaug’s motion to dismiss. Federal Judge Carol Amon denied the motion and ruled that the state appellate court had misinterpreted the law in question. She ruled that regular tax law indeed applied to the tobacco trade on Indian reservations, as it does everywhere in the state. She issued a temporary injunction banning all further cigarette sales at four stores identified in the city’s suit. Chief Wallace and the Unkechaug appealed. On September 25, the court announced that though the appeal would be heard, the injunction would continue. But that leaves ten other smoke shops in the Poospatuck reservation, and the cars are still backed up around Squaw Lane. “The city will go after every dollar that is owed to city taxpayers,” said Bloomberg in a statement.  

Wallace is far from ready to smoke the peace pipe, however. He says it’s the same as it was with whaling in the seventeenth century. “The goal here is not to stop us from selling cigarettes,” Chief Wallace said. “It’s to try and destroy us as a people, because every effort that we made to resolve these things has met with resistance. They don’t want to do it. They want to take it as far as they can to try and kill us.

 “They need a scapegoat for not blaming his friends on Wall Street,” said the chief, his tone slowly rising. He began pacing in circles, literally hopping mad. “Who is a convenient scapegoat? The smallest tribe in New York, selling a demonic product—that’s a good scapegoat.”

Read the whole thing here.