FLORIDA'S TOBACCO TAX: BE VERY CAREFUL WHAT YOU WISH FOR

Whenever you hear politicians touting the wisdom of their pet ideas,
remind them of the Law of Unintended Consequences. The positives they
ascribe to certain courses of action could be accompanied by negatives
that offset the benefits.

Earlier this year, the Florida Legislature voted to increase the state
cigarette tax by $1 a pack to help balance the budget. The
anti-smoking scolds declared that along with raising money, the tax
would cut down on tobacco use, improving the overall health of the
population and saving on medical bills.

The health benefits are undeniable, though the financial benefits are
harder to quantify. There's no denying people who don't smoke tend to
live longer than those who do, but death is inescapable. The
end-of-life medical expenses for non-smokers may come a decade or more
later than for smokers, but eventually they will arrive, along with
other expenses that can accompany a long life.

Obviously, people would be better off if they didn't smoke, but that
doesn't mean excessive taxation of tobacco is the way to engineer a
tobacco-free society. It's hard to imagine a more regressive tax.
Wealthy, educated people smoke far less than poorer, less educated
people, so the financially underprivileged pay a disproportionate
share of tobacco taxes.

"All these people need to do to avoid the taxes is to stop smoking,"
the scolds argue. But nicotine addiction is one of the hardest
addictions to break. That's why tobacco companies still turn profits.

A decade ago, Florida and other states entered into agreements with
rich, contingency-fee lawyers to sue cigarette manufacturers. State
attorneys general claimed their aim was to punish the evil tobacco
companies. Naturally, the tobacco firms passed the cost of the legal
settlements onto consumers.

The cigarette producers continued to make profits. At the same time, a
few lawyers worth tens of millions of dollars increased their fortunes
to hundreds of millions.

The financial windfall for the trial lawyers wrung out of poor smokers
was unconscionable, but it wasn't criminal. The current inclination of
governments to raise tobacco taxes, however, is resulting in huge
financial gains for those who do break the law.

High taxes now make cigarette smuggling, counterfeiting and
bootlegging even more profitable. Buy cigarettes in a low-tax state
and sell them illegally in a high-tax location at a price less than in
a store. Better yet, hijack a truck loaded with cigarettes and unload
them in New York City, where a pack of legal smokes can cost upward of
$10.

Smuggling across state lines used to be largely the purview of
small-time operators. But according to a recent Wall Street Journal
report, with financial incentives rising, organized crime is getting
more and more involved. States now are losing up to $5 billion a year
in taxes because of illegal cigarette sales. To recoup some of the
money, Florida and other states, along with the federal government,
are redoubling their efforts to crack down on the illicit trade.

Good luck. With profits from illegal sales so high, more and more
people have decided the rewards are worth the risks. Consequently,
high taxes are resulting in a tobacco war that is smaller, but not
dissimilar to the un-winnable drug war the United States is fighting.

The result will be more arrests and more incarcerations, putting an
even greater strain on the criminal justice system. The lives of
law-enforcement officers will be put at risk as they confront the
cigarette smugglers.

One thing's for certain: The tobacco scolds will ignore the problems
and continue to claim that high cigarette taxes are a great thing.
This will prove once again that the biggest threats to society come
from those filled with righteous indignation.