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.
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.