Marking the one-year anniversary of longtime smoker Peter Jennings’ death from lung cancer, ABC’s Dr. Timothy Johnson wrote up a prescription as outdated and ineffective as bleeding a patient: growing government.
“At the government level there are three proven techniques. One is to raise prices by increasing taxes, the second is to limit access by minors, and the third is to conduct mass media campaigns,” Johnson said on the August 7 “World News with Charles Gibson.”
Although ABC's medical editor went on to slam government for having “dropped the ball” on his prescription, anchor Charles Gibson didn’t include anyone with a second opinion.
If he had, that person could have mentioned a 1998 study by Cornell University, which found that “a $1.50 a pack tax boost” on cigarettes would only “reduce the number [of smokers] by about two percentage points.”
One reason for the lack of drop-off in smoking is that heavy taxation merely encourages consumers to seek untaxed tobacco. High tobacco taxes encourage cigarette smuggling, tax evasion and black markets, while ultimately losing governments millions in revenue.
Cato Institute senior fellow Robert Levy wrote on March 20, 1999, that “a $1.00 bump in price” from tax hikes “will mean $23 billion in potential black-market profits” for bootleggers, about four times the U.S. net income of America’s largest tobacco makers.
Four years later Tax Foundation economist Patrick Fleenor took an in-depth look at how high taxes on cigarettes create a crime-ridden black market for smokes, and a year later the General Accounting Office (since renamed the Government Accountability Office – GAO) found similar results.
“As cigarette taxes increase, so do the incentives for criminal organizations, including terrorist organizations, to smuggle cigarettes into and throughout the United States,” USA Today reporter William Welch quoted the 2004 GAO study in his July 24 article on a proposed 300-percent tax hike in California.
While Fleenor’s study centered mostly on New York City’s experiences with a black market, he found that smuggling related to tax evasion is a global problem.
“Governments around the world have responded to growing concerns about smoking and health by raising cigarette tax rates,” the economist wrote, adding that “according to the World Health Organization, some 20 billion packs of cigarettes are smuggled internationally each year” resulting in “revenue losses of between $25 billion and $30 billion annually.”
Like New York City’s experience with mob violence tied to cigarette smuggling, high-tax countries “have experienced considerable problems with the crime associated with cigarette bootlegging.”