OK, think like a government bureaucrat:
NEW YORK - The big cigarette tax increases that many states are instituting to balance their out-of-whack budgets are raising fears that the trend will make black-market smokes more profitable and lead to more cigarette smuggling.
Cigarette smuggling has been going on for generations and already costs states untold billions in lost tax revenue.
Criminal gangs stock up in low-tax states like Virginia and Missouri, truck the cigarettes north and illegally resell them in high-tax states like Michigan and New Jersey. Other buy cartons and cartons of tax-free smokes on Indian reservations and sell them elsewhere. Buyers order untaxed cartons of murky origin on the Internet. And ships arrive from China carrying cargo containers filled with counterfeit cigarettes.
So. If the state raises the sales tax by 16+ percent, and I live on the border of a surrounding state with a lower sales tax and go to that state to save money on a big-ticket item, I am a smart consumer, and there will be endless debates about how smart it was for the state to raise the sales tax. But if the state raises the taxes on cigarettes, and I see an opportunity to cross the border to buy cheap and sell dear, I am a smuggling criminal.
Boy. We don't even have to get to state-sponsored gambling to talk about how Indiana gave up any pretense to the moral high ground.
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Law of unintended cosequences strikes again. I've long known legislators to be extremely short-sighted and would offer simple advice I learned years ago. (not that any of them would take it)
Before making any major decision, simply ask yourself this:
What are the next 3 things that will happen as a result of this decision? The hard part is actually visualizing those next three things, but if you do it'll save you from making a lot of bad decisions.
"Every action has a reaction".
I'd be interested in learning more about those "counterfeit cigarettes" from China.
Seems to me that when I was in college, decades ago, counterfeit cigarettes came from places like Acapulco, and Maui. Kids would gather together to smoke them in private, as they didn't want the revenooers to catch them. They weren't cheaper, though; they cost $5 to $10 an ounce, while non-counterfeit cigarettes ran about 75c at gas stations.
The difference, Leo, is that taxes on liquor and cigarettes are excise taxes, not sales taxes. It's not illegal to get something subject to sales tax in an adjoining state, but you're required to pay a *use* tax on it, equal to the amount of sales tax you didn't pay. Both Ohio and Indiana have you pay the use tax on the state income tax form, and I assume most other states handle it the same way.
Many states are pretty lax about collecting income tax. If you file a federal income return, but not a state income tax return, many states will send you a letter reminding you to file and pay, but very few follow up if you don't.
As far as that goes, the IRS can fine you $100 a month for not filing a federal income tax form, but they don't usually do so if you don't owe any tax unless you really get someone POed at you. Mostly, they charge you a penalty based on underpayment of tax (which actually needs to be paid through the year you earn it, not the following April 15), plus interest on that tax.
If the state is having financial troubles, the easiest way for the state to collect money would be to actively go after people who aren't filing state tax returns. If someone is actually filing a tax return and paying taxes, it's pretty expensive for the government, whether the IRS or the state, to prove that they are cheating, especially if they are underreporting income from a cash business. And it'd be highly unprofitable to try to collect use tax, because you usually have no way of figuring out how much someone owes.
So hypocrisy? No. Just a matter of economics.
Ohio cops used to sit outside Indiana liquor stores and copy down the Ohio license plates of patrons. If you got caught with more than two bottles of untaxed liquor when you drove back into Ohio, you could lose your car. Easy to prove, and for every person you catch, you probably scare 1000 others into buying their liquor in-state.
I was with Ray Stahl one day when he invited me to come along to service a payoff pinball machine he owned at a southern Paulding County club. They were open later hours than regular bars, their liquor was from Indiana, and I'm not sure where they bought the untaxed cigarettes they bought. There were two locked doors to pass through in order to enter. One, the owner had the key to, to control hours of operation. The other one, members had a key to, and that lock was changed every year in order to keep members paying their annual dues. The first one to get a key to that door each year, Ray said, was the county sheriff.
Have you ever heard of a county sheriff that served at least two terms, who did not retire a millionaire?
I heard stories, too, about a whorehouse down on 637, supposedly owned by several lawyers. I never had the opportunity to visit, never even knew exactly where it was, but I knew of several women who didn't care for marital relations, who sent their husbands there on a regular basis.
I'm not sure how it got shut down. Perhaps the sheriff's wife saw his car parked there. That's a pretty rural area; it's not like you could park on the next street over and walk, and of course, there's no taxi or bus service.
Ray Stahl died a few years ago, and Hazel sued the county hospital for malpractice. I wasn't living in the area, and I don't know how much she collected, but it couldn't possibly have been enough. When he mentioned his wife, he was likely to be kidding about being henpecked, but the way his face would light up, it was obvious that he was very much in love.