Higher tax rate creates black market for cigarettes

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by Brad Woodard

KHOU

Posted on January 28, 2013 at 11:35 PM

HOUSTON, Texas -- The tax rate on cigarettes is so high in Texas that it is sparking a huge draw for illegal cigarettes creating a new kind of organized crime, according to experts.

“I remember when my mom paid 59 cents. I remember those days, but I never thought I’d pay $3 a gallon for gas either,” said Ora Patterson, a smoker, referring to increased cost of pack of cigarettes.

It’s one of the reasons Pamela Pope rolls her own.

“Yeah, I figure I can buy a bag of tobacco for $25. (It) lasts me all month versus $140 on filtered cigarettes,” Pope said. “I know a lot of people who try to steal their cigarettes.”

Recently, the two burglars stole $6,000 worth of cigarettes from a north Houston store.

“I’m from Illinois, and we all go across the river to Missouri to get cigarettes because taxes are a lot cheaper,” Linda Burch said.

Crossing state lines in search of cheaper smokes is catching on in Texas as well, but with far more negative results.

A new bi-partisan study out of Washington revealed more than a third of the cigarettes sold in Texas are smuggled illegally from other states with lower tax rates, and then turned around for a profit.

The tax rate on cigarettes in Texas has increased by 244 percent since 2006, and Texas has the eighth highest rate of cigarette smuggling in the country.

Nathan Jones is an expert on drug smuggling with the James A. Baker III Institute for Public Policy at Rice University.

“It’s clear the level of prosecution on tobacco is going down precisely at a time when taxes are going up here in Texas, resulting in prime real estate for organized crime,” Jones said.

It is a prime example, he said, of public policy having unintended consequences.

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