Cigarette taxes protect health by reducing smoking.
But tax disparities across states create a multi-billion-dollar annual market in smuggled tobacco products. Current enforcement efforts are inadequate and ill-organized.
As a result, the illicit trade in tobacco products (ITTP) is growing, and the larger the market grows, the harder the problem of controlling it. (That’s the usual positive feedback problem in violation rates due to enforcement swamping.) So inaction now has long-lasting costs.
Tax equalization would solve the problem, but isn’t likely to happen. Feasible changes in enforcement strategy could protect health and revenue while reducing crime.
Further thoughts on this from Mike DeFeo and me now up on SSRN.