High tobacco Taxes create the same problems as 1920s Prohibition

The high tax burden on tobacco results in de facto prohibition of the products, bringing all the undesirable outcomes associated with alcohol prohibition in the 1920s. In our research we have found evidence of substantial tobacco smuggling from low to high tax jurisdictions, violent crime, theft of tobacco and tobacco tax stamps, corruption of law-enforcement officers, and even funding of terrorist organizations through crime rings.

Tobacco Taxation and Unintended Consequences: U.S. Senate Hearing on Tobacco Taxes Owed, Avoided, and Evaded

Drenkard Statement to U.S. Senate Finance Committee July 2014

Hearing on Tobacco: Taxes Owed, Avoided, and Evaded
Before the U.S. Senate Committee on Finance

Chairman Wyden, Ranking Member Hatch, and members of the Committee:

I appreciate the opportunity to submit this statement on tobacco taxes and their impact across the country. In the 77 years since our founding in 1937, the Tax Foundation has monitored tax policy trends at the federal and state levels, and our data and research are heavily relied upon by policymakers, the media, and the general public. Our analysis is guided by the idea that taxes should be as simple, neutral, transparent, and stable as possible, and as a 501(c)(3) nonprofit, nonpartisan organization, we take no position on any pending legislation.

We hope that the material we provide will be helpful in the Committee’s consideration of the issue.

Executive Summary

Tobacco taxes are the highest they have ever been in the United States. The federal rate currently stands at $1.0066 per pack of cigarettes, and state and local rates add as much as an additional $6.16 per pack (as in Chicago, Illinois). These combined rates are equivalent to a tax in excess of 200 percent in some locales.


So the Senate held committee hearings on the Highest taxes and found just what we already knew everytime Prohibitionists get their way!

Im sure Al Capone is smiling down from everywhere.

3 thoughts on “High tobacco Taxes create the same problems as 1920s Prohibition

  1. harleyrider1978

    Axe the tobacco tax escalator: Punitive taxation of smoking is just fuelling the black market
    15th February

    Simon Clark

    “We believe it makes economic sense not only to abolish the duty escalator but to freeze or even reduce tobacco taxation. It would offer long overdue relief to hard-pressed consumers, while also discouraging smokers from using the black market and maximising revenue at a time when the government needs every penny to reduce the deficit. Abandon the escalator and smokers would still make a major contribution to the economic health of the nation, far in excess of the cost of treating smoking-related diseases, currently estimated to be £2.7bn a year.

    Punitive taxation ignores a basic premise of a free society – adults should be allowed to make informed choices without excessive intervention from government. Educate but don’t discriminate. Government policy should reflect the social and economic realities of smoking, not the smoke-free utopia some people would have us inhabit. If George Osborne drops the duty escalator, he will be criticised by anti-smoking zealots, but he will be applauded by others as the chancellor who discouraged criminal activity, maximised revenue and – most importantly – treated smokers as human beings rather than unwilling participants in an antediluvian experiment in social engineering.”

    “Axe the escalator, George, and give law-abiding consumers a break.”


  2. Smoking Lamp

    The only ones to benefit from extreme tobacco taxes are organized crime and black market profiteers. Active resistance to this incremental step toward prohibition is essential.

    Liked by 1 person

  3. harleyrider1978

    Totally agree SL its historically correct that everytime they push prohibition it creates vast blackmarkets of the product,which is what forces governments and progressive scumbags to finally give up and repeal it all. Like Einstein said its ridiculous to keep doing the same experiment over and over hoping to expect a diferent outcome.



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