Wednesday, March 18, 2009

Obama's new federal initiative: black market for smokes

By Rick Morris

With all of the new initiatives flying around from the Obama Administration, one very big one that has already been implemented has flown under the radar: the April 1 implementation of a 62 cent tax on each pack of cigarettes sold to fund the expansion of the federal SCHIP program (ostensibly for the health care of poor children).

In some places, like western Florida, manufacturers have already hiked the prices so as to avoid a last-minute panic and supply shortages at the end of March. But just as the Obama crew has been caught off guard by the renewed public interest in the classic tome ATLAS SHRUGGED, they are demonstrating yet again how their alleged egghead genius about all things economics falls apart completely when it is confronted with the reality of human nature.

Just as the high-end taxes that they will raise will stifle economic activity by giving disincentives to our nation's most active federal revenue contributors, so too will people seek to evade the tax that will drive up the price of a pack of smokes to almost $5 a pack in most places. How will they manage this? Two words. Black market.

Now, in the age of the Internet and eBay, this may take more nebulous, non-violent forms -- albeit it could also lead to the rise of underground tobacco sellers operating completely outside the realm of legal accountability, meaning that if you die of pesticide consumption, your immediate family is probably S.O.L. for purposes of a lawsuit. But it could well lead to bloodshed as well. Canada strode down this path years ago and they've been plagued by criminal gangs creating an underground economy ever since. New York State has also been dealing with this for much of this decade already.

For as much as the academics on the left love to mock supply-side economics, they really do work. Whether the subject be income taxes (by the way, if you ever get into an argument with a pinko about the effects of higher tax rates on the wealthiest, ask them why the tax rate isn't 100% so that the government could really clean up), these regressive cigarette taxes that hit the poor disproportionately (irony alert: many of these poor people will be spending money that circles back to their own kids' health care via SCHIP -- once federal bureaucrats have taken their cut, of course) or any other kind of taxation, there is absolutely a tipping point at which people will seek to evade any further pinch on their wallets from Uncle Sam. The ivory tower "experts" that Obama attracts have no concept of basic human nature in that regard. To them, people are dumb enough that they'll continue to hand over whatever amounts of money Da Gubmint deems necessary, no questions asked.

So when Obama, Pelosi and Reid are having a self-congratulatory media event a year from now and tussling the blonde hair of a child that they're going to exploit for a prop when they talk about how now he's got health care thanks to them, remind yourself that the real winners are the bloodthirsty smugglers in the crime syndicates.

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