- The Washington Times - Saturday, June 12, 2004

Taking a page from the Mafia’s playsheet, terrorist organizations are scoring millions off the cigarette-trafficking racket here in the United States. As The Washington Post reported Tuesday, officials at the federal Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) have opened hundreds of illicit cigarette-trafficking cases with links to Hezbollah, Hamas and al Qaeda, a dramatic increase from the handful of cases ATF was investigating a few years ago. William Billingslea, an ATF senior intelligence analyst, told The Post that cigarette smuggling has begun to rival drug trafficking as the funding of choice for terrorists. Considering that cigarettes are a legal product, this is quite a paradigm shift, all the more regrettable as it is entirely of our making.

The increase is not, as some no doubt will argue, a result of the U.S. war on terror. Quite simply, some crafty terrorists are putting their Econ 101 classes to use, exploiting the price discrepancy that outrageously high cigarette taxes have created. “The money is so lucrative,” said Mr. Billingslea.

As it appears that our state and local lawmakers seem intent on ignoring sound economics, allow us to explain why this is. If Virginia has only a 2.5 cents tax per pack, anyone can buy a carton, legally, for $20. If this buyer is of the entrepreneurial sort, he can turn around and sell that carton to a smoker in New York City, where cigarette taxes go as high as $3 per pack and cartons as much as $75, for whatever price will earn him a acceptable profit. Expand this simple economic model, and it’s not hard to see why a smuggler can make as much as $2 million off a truckload of cigarettes. Indeed, organized crime has been doing it for decades.

The solution to this black-market scheme goes beyond stricter law enforcement. While we are encouraged that ATF officials have uncovered so many cases of terrorist-smuggling activity, it would be an act of profound negligence to suggest that the problem is solved, and that, as a country, we should go on taxing smokers at ridiculous rates. New York Mayor Michael Bloomberg and other tax-happy lawmakers have given no hint that they understand the consequence of their nanny-state politics, which reach far beyond asking a smoker to cough up a few more dollars.

In February 2003, as we editorialized, 11 terrorists were indicted for cigarette smuggling and funneling funds to Hezbollah. Yet states and cities continue to demand higher cigarette taxes by employing their “it’s for the kids” populism. The only way to end this madness before those funds end up financing bombs is to lower cigarette taxes now.

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