Saturday, November 27, 2010

The Big Apple Black Market Blows a Big Hole in a New York Tax

NyPo reports on New York's crazed taxes on cigarettes:
It doesn't take much coaxing to get otherwise legitimate Big Apple businesses into the illegal cigarette trade.

"They come out here like they are salesman from Pepsi or the potato-chip company," said the owner of a north Bronx bodega that sells smuggled Newports and Marlboros for $8 a pack.

"I don't know how the city is going to stop it. The city is losing a lot of tax money," he said. "They are killing themselves, because no one is paying $12 for a pack of cigarettes, and I'm not paying taxes on the money I make selling them."

His supplier provides him with cartons between $45 and $50 a pop, which gives him a $30- to $35-per-carton profit.

Despite the risks, individual entrepreneurs are also getting into the act.

"I needed a second job, and since I couldn't find one, I decided to sell cigarettes," said Gregg, a 30-year-old who sells cigarettes out of his backpack for $8 a pack in Midtown. "So far, I'm making a good profit. Sometimes I make $160 a day."

Greg said he simply drives to Delaware, where he can get a carton for $27, and loads up his trunk.
Call it the Delaware Curve, and consider it a corollary to the Laffer Curve. There is a point at which if a state raise taxes on an item significantly higher than neighboring states, the state will actually experience declining tax revenue from the item taxed, as black market entrepreneurs will start operating and smuggle the item from the lower tax state to the higher tax state and sell the item tax free on the black market in the higher tax state.


  1. Not that I think too much of the age limits, but the tax undermines the under-aged sales ban, too. The black market isn't going to check IDs.

  2. I love this type of civil disobedience. They had better be careful though. I bet the NYPD already has undercover sting operations in the works in an attempt to curtail this diabolical scheme. Buying cigarettes from willing sellers, and then selling them to willing consumers: illegal in the land of the free. What are U.S. Soldiers dying for again? Certainly not our freedom, as this story makes quite clear. My dream is to be on a jury where the prosecutor is trying to convict someone of selling cigarettes inexpensively. Jury nullification is becoming a fantasy of mine. Cheers.

  3. Ever wonder why so many corporations have headquarters in Englewood Cliffs New Jersey?

    Back in the 60's, the NYC taxes were so onerous, that many corporations (Corn Products/Best Foods comes to mind) moved to New Jersey taking all that tax revenue and jobs with them.

    The parasite is devouring the host. Not a good plan.

  4. People have been selling bootleg cigs in NY for decades...

  5. A few years ago the Canadian government slapped an enormous tax increase on cigarettes and created (surprise!) a nice new business opportunity running smokes across the St. Lawrence from the Mohawk reservations in New York. Even the Mayor of Cornwall Ontario went into the business.

    The people of the "health" gestapo are all brain dead.

  6. Haha, this is great! I love it whenever state authority is undermined. If I was younger and lived in NYC, I'd be selling cigarettes too.

    Anonymous from 11:45 AM: I totally agree with every point you made.

  7. Any activity that sticks it to Gauleiter Bloomberg and the City Council sycophants is great. There's more than just a black market in cigarettes in NYC...which is the economic consequence of a high-tax, over-regulated city. Gloom-and-Doomberg is more worried about salt in soup than how the city is imploding.

  8. Heck, they oughtta buy 'em from the Russkies online for $20/carton (or less). Smokers I know say they are better cigs too. Let's see them internationalize this market!

  9. Three cheers for black markets!!!

  10. Wait until they implement a value added tax under the guise of national debt reduction. We'll be hawking everything under the table to get around the tax. I'm looking forward to it. Think there was an outrage over TSA? I want to see how people react to the government raiding secret discount markets on produce and other foodstuff. Headline: "Mother of four arrested for buying milk from unsanctioned market because she couldn't afford it at Wal-Mart."

  11. It's the same here in the EUSSR. Tobacco packs in Spain/Portugal $6, tobacco packs in the UK $18.
    Where do you think I go for my vacation every year?

  12. It is telling that the free market is termed the "black" market by the government.

  13. Next we will see black market Happy Meals being smuggled into San Francisco.

    I'll buy those too.

  14. Reminds me of Gorbachev's semi-prohibition of alcohol circa 1985 in USSR. The sales of alcohol were limited, almost cut to nothing (liquors were sold for only 3 hours a day - 2-5 pm, on workdays only; 1 liter of alcohol per customer).

    Next thing you know: people were sneaking out of their jobs to buy booze. Then, of course, black-market kicked in:
    - senior citizens (with a lot of free time on hands) were staying in lines during a day buys alcohol and later reselling it for a hefty profit.
    - all sorts of home-breweries popped up all around the country so the govt had to impose a criminal penalty for that type of produce. Effectively, govt monopoly on alcohol production was enforced big time (not like it was legal before to produce and sell your own booze, but there were not much stimuli to do it anyway)
    - a huge amount of counterfeit, low-quality, and oftentimes poisonous alcohol products was produced by all sorts of criminals in Chechnya and Dagestan and smuggled into other republics
    - worst part, a good chunk of population started drinking substitutes or alcohol-contained by-products of all kinds such as glass-cleaning substances and so on.

    The list can go on... The baseline though is how a handful of brain-dead and senile officials can bring so much harm to a people that even a focused effort of an enemy diminishes in compare.

  15. i'd love for these statists to raise taxes on all products. that way it will drive the whole market underground and away from the government. then you will have mass civil disobedience from simply buying stuff. it will signal the end of said government. cash (and gold/silver) is king baby!!

  16. Be aware that in less than 60 days senate bill s 510 will go thru making small garden farming ,home canning,trading,selling illegal.Saving seeds including survival seed pax will be illegal.Its being snuck thru

  17. (QUOTE)
    Be aware that in less than 60 days senate bill s 510 will go thru making small garden farming ,home canning,trading,selling illegal.Saving seeds including survival seed pax will be illegal.Its being snuck thru (QUOTE)

    I looked up that bill and gave it a brief (brief for 120 pgs) read-through and didn't see anything like what you're talking about. Where did you see/hear this about home-canning and gardening?

    This is the text of senate bill s510 in its most recent form:

  18. I don't think this is working. Sometimes there's only a bridge that separates a $5 pack or double the cost. There's someone making a huge profit and it's not taxes.