Cigarettes have been in our news a lot since the New Year. Last week Wisconsin's new cigarette tax was implemented, and smokers are now sending one dollar per pack in additional tax to Madison. Now there is talk of a legislative ban on smoking in all public places.
Mick Jagger was once a student at the London School of Economics, and is renowned in the music industry for his business acumen. In 1971 he made tax "exiles" of the Rolling Stones by moving the band permanently out of England. They settled in New York City, and in 1978, released the album Some Girls, which, fueled by hit after smash hit, went multi-platinum. One of those hits, When the Whip Comes Down, is a tough and gritty anthem about some of the darker sides of the city's sub-culture. I saw a bit of that sub-culture on a trip there last September.
In the five burroughs, the combination of State and City taxes on cigarettes has risen to such a level that for the most part, people just don't buy them there anymore. Instead they cross the Hudson to New Jersey or head north to Connecticut; a predictable reaction that is costing the City enormous revenue. But what I found fascinating was the functioning of a black market that sees people drive to Virginia where tobacco is cheap and taxes on it are low. They return to the City, their vehicles loaded with smokes, and sell their contraband on the street at a fraction of what a retailer can charge.
This has a lot of people in Gotham City Hall hopping mad about black markets and lost revenue. But whatever one's reaction, surprise should not be one of them, for people and markets ALWAYS react to economic stimulus; even mega-wealthy rock stars.
I spent nearly six years of my young life addicted to Marlboro Reds, and know first hand what a powerful vice tobacco is. But despite this, I believe we will ultimately see the revenue Wisconsin collects from this new tax FALL, as enterprising people around our State take action to avoid the new tax, or best of all, quit.
But specifically, this cigarette tax and the proposed ban on smoking is a bit surreal. Government at every level spends millions in public health campaigns to prevent smoking, while at the very same time, grows ever more addicted to the revenues generated by the very habit it is trying to eradicate.
The title of another hit song from Some Girls could describe such an approach.
Shattered
