THE ECONOMICS OF SMUGGLING

No matter how well-known certain historical events may be, some Americans
simply refuse to learn from them.

Who doesn't know the story of Prohibition and the futile attempts by the
federal government to outlaw the consumption of alcoholic beverages? Black
markets thrived, violence ensued and Americans faced declining rights as the
feds tried to stop the flow of booze.

Yet when it comes to, say, cigarettes, the same sort of crusaders are taking
a similar approach - albeit through higher taxes, rather than an outright
ban - to the Prohibitionists, and finding the same sort of disappointing
results. The laws of economics, like the laws of nature, appear to be immutable.

Case in point: A front-page story in Friday's Register reports that "Four
months after California levied the second-highest cigarette tax in the
country, the smuggling of untaxed cigarettes from Mexico has exploded."

It's simple economics. Taxes are forcing dramatically higher prices on
cigarettes as a way to discourage people from smoking them. But people still
want them, so black markets and smuggling rings emerge to fulfill the
demand. The higher the taxes, the more profitable the smuggling, and the
more willing people are to defy the law.

Several years ago in Canada, the national government imposed taxes that
increased the cost of cigarettes nearly 21/2 times.

Smuggling from the United States and elsewhere exploded, and tobacco
violence became more common. Eventually, the Canadians lowered the taxes to
reduce the problem.

Tobacco smuggling groups already are operating in the United States, where
they illegally transport cigarettes from low-tax states to high ones.

According to the Richmond Times-Dispatch, they have become increasingly
violent: "The nature of the crime and the criminal have changed. It's no
longer three guys from New York in a van driving to the Carolinas to get
smokes for the cigarette machines in their bar. The smuggling rings are
organized, sophisticated and willing to
protect their assets, law enforcement officials said."

With the price differential between Tijuana and San Diego far higher than
the differential between Raleigh and Rochester, the potential for
gun-wielding gangs is even higher in California.

We wish the activists who devised the Proposition 10 tobacco tax, and the
voters who supported it, would have spent more time thinking about economics.