Perhaps even virtue has need of limits.

That’s because a good thing—such as persuading people that smoking is a bad thing—can go too far.

We see it here in New York, where some of the highest smoking taxes in the world have led an avalanche of illegal cigarettes brought into the city and state. They have also had had some unintended consequences such as creating a huge illegal trade.

Buttleggers “love New York.”

New York is now fertile ground for their illegal activities. It is now more expensive than ever to smoke here so the city will remain a prime target for buttleggers.

New York has “the worst smuggling problem in America,” said Scott Drenkard, with the Tax Foundation, which has studied the problem.

The least one can now legally pay for a pack in New York City is $13, which was recently raised from $10.50.

“For someone who smokes cigarettes regularly, cigarettes can cost as much as two months’ worth of groceries, family cellphone bills for a year, or a vacation,” according to Dr. Mary Travis. Bassett, New York City Health and Mental Hygiene Commissioner.

Cigarette taxes and a new minimum price rule have raised the price of a pack about 200 percent over the past decade. Observers say buttleggers, those trying to avoid pricy cigarette taxes by mass buying cheap smokes in a low tax state such as Virginia, then selling them in New York illegally, have a strong incentive to do it. (Virginia, for example, has a 30-cent tax versus New York City and State’s $5.85). Unfortunately, international terrorists and crime families also have a strong incentive to play this game.

Whose Taxes Are Higher?

With already almost the highest butt taxes in the nation—Drenkard says Chicago may be passing the Big Apple—New York officials haven’t added more taxes. Instead they now require sellers raise the minimum price of a pack by $2.50. But some anti-smoking officials see this as possibly counterproductive (See “The Anomaly of High Butt Prices” below). That means a pack a day habit costs some $4,800 a year. That can fuel buttlegging, city officials concede.

Price disparities create incentives for illegal activity,” says,” Kim Kessler, Assistant Commissioner for the Bureau of Chronic Disease Prevention and Tobacco Control, NYC Health Department.

“But we know that despite this activity, raising the price of tobacco products still reduces consumption. The lives we save by raising the price of tobacco far outweigh any lost taxes due to illegal sales,” Kessler told the New York Post.

The Illegal Outnumbers the Legal

Since 2006, says a Tax Foundation report, those illegal sales have risen. The report says the number of illegal cigs here now “outnumbers” the number of legal cigs. Illegal butts are some 60 percent of the market.

Yet city and state have increased enforcement. State officials set a record in 2017 by seizing $6.6 million worth of illegal tobacco products, $1 million more than in 2016.

But bad butts keep coming.


Compared to hard drugs, smuggling butts is a “low risk, high reward business,” according to David Luna, of the OECD Task Force on Countering Illicit Trade.

“The illicit trade in tobacco is perhaps one of the most widespread and most documented sectors in the shadow economy,” Luna recently said. “Illicit tobacco,” he says, “is an important source of revenue for criminal and terrorist networks alike.”

Winning the Battle, but Losing the War?

Still, city officials say they are winning the war.

“The adult smoking rate has decreased from 21.5% in 2002 to 13.1% in 2016,” Kessler says. Increasing cigarette price floor to $13.00 is projected to lead to a 6.4% decline in adult cigarette smoking.” But 850,000 New Yorkers still smoke.

So city officials also say they might expand the tax and minimum price policies and take action against other unhealthy products (See “New York Will Keep Going” below). Bassett, “encourages” smokers to use programs such as the NYC mobile app HelpMeQuit.

The Anomaly of High Butt Prices

The New York City and New York State, which already have a combined $5.85 levy on a $13 pack of cigarettes, haven’t added more taxes recently but require sellers to add $2.50 to the price. But this new effort to curb smoking could have some unintended results. If legal cigarette sales continue at the same rate at the higher price, then tobacco companies’ profits could rise.

“It’s incredibly weird,” said one official with an anti-smoking organization who didn’t want to be quoted by name. This person, who hates cigarettes, privately gripped: “The higher price could mean the retailers or someone else in the supply chain could be getting something out of this.”

New York Will Keep Going on Butt Taxes

Q&A with Kim Kessler, Assistant Commissioner for Chronic Disease Prevention, New York City Health Department

Q: Do you think New York officials will keep going beyond $13 a pack minimum price?

Kessler: “Increasing the price of cigarettes and tobacco products has been shown to prevent youth and adults from starting to smoke and encourages those who do smoke to quit or cut back. Because tobacco use remains a leading cause of premature, preventable death in NYC, killing an estimated 12,000 New Yorkers annually, we will continue to pursue our comprehensive tobacco control strategy, working to make it harder to smoke and easier to quit.”

Q: Would the city consider similar efforts using prohibitive taxes or minimum price rules against, say, products that might lead to obesity or other health problems?

Kessler: “The city’s mandate is to protect and promote the health of all New Yorkers. The Department continually reviews information and evidence regarding possible approaches to do this through broad-ranging innovative policies and programs.”

Q: As taxes are rising millions of illegal cigarettes are sold here. Will you expand enforcement?

Kessler: “A violation for selling tobacco products below a minimum price will now take on greater consequence, as a licensed tobacco retailer will be one step closer to losing its license. Existing violations such as selling to minors, selling untaxed tobacco products, selling loose cigarettes, and selling flavored tobacco products can also lead to revocations.”

Bresiger Commentary: Too Much Virtue?

I certainly don’t think smoking is good. I stopped smoking after one pack when I was 16 because I was too damn cheap. My wonderful father started bumming cigarettes from me and that ended my smoking days.

However, I don’t want to impose my point of view on anyone. That is a worldview that makes me a lover of liberty. For instance, I think coffee is bad and I gave it up almost 40 years ago. Knowing that it was wrecking my health, should I lobby for laws to stop people from drinking coffee? I also think that, with the majority of Americans fat or obese, that poor eating habits are literally putting millions into early graves.

Should we ban Twinkies? Should I advocate for legal restrictions on how much people should eat?

I wouldn’t. But, as you might see from the Q and A I had above with a public health office, New York officials might not be far from imposing such laws, which would be an infringement of the liberty of the individual. That is if the average American still reveres liberty over the “security” and welfare benefits offered by governments today. These are typically governments that often know how to win elections by going heavy on promised programs just before voters go to the polls. Promises that usually don’t include what the taxpayers will ultimately pay for all these “gifts.”

There are two ways we can change society: Top down or from the grass roots. We can employ the heavy hand of big government, which would impose a dictatorship of virtue.

The other way to better society is through a process of education. The latter is the more effective in the long run. But its drawback is that it takes a long time; sometimes generations. But the self-anointed elite who decide they most save us from ourselves, the men or women who would engage in a “dictatorship of virtue,” are usually impatient people.

I believe there must limits to how far government can go to prevent a bad thing. I believe Communism is unachievable or will result in a dictatorship. Should I call for laws against Communists who peaceably want to radically change society?

The answer is no. Freedom of thought, a U.S. Supreme Court justice, famously said, means freedom of thought for the idea “we hate the most.” One doesn’t fight tyranny with more tyranny.

Government, with its fearsome power even in a democracy to do incredible things, must have clear limits even when it is pursuing virtuous goals such as reducing smoking rates. Democracy itself must have limits because democratic tyranny could be the greatest tyranny of all. This was one of the lessons of Alexis de Tocqueville in “Democracy in America.”

There is no perfection in democracies. They just tend to be less bad than other forms of government. That is one of the lessons I have learned in 65 years of primarily living in a de facto one-party democracy called New York City. Opposition parties here in the Rancid Apple are a joke. Democrats decide almost everything just as Republicans decide almost everything in other parts of the country. And, in most parts of this formerly free nation, both major parties quietly agree to keep out third parties; to make life miserable for men and women with different ideas.

Even democracies can act in totalitarian ways. Some of their most effective proponents have used methods that would have delighted a Stalin a Hitler, a Huey Long or a Jimmy Walker.

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Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. The eBook version of his latest book "MoneySense" is available now for Free Download by clicking HERE

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