Rightwing think tank thinks a tax on cigarettes is worse than smuggling

The rightwing think tank Mackinac Center for Public Policy thinks that because criminals break the law we should do away with the reason they break the law instead of increasing enforcement.

Last week the Mackinac Center released its annual report on cigarette smuggling and found, again, that Michigan has one of the highest smuggling rates in the country. According the the Mackinac Center, “Michigan’s inbound cigarette smuggling rate was 10th highest in the nation in 2009. Michigan’s smuggling rate, which was measured as a percentage of in-state cigarette consumption, represents a slight improvement over its 9th place ranking in the previous analysis, which used data from 2006. Michigan is also in the top five states in its rate of casual cross-border smuggling by its residents.”

“Lansing’s incoming legislators should be careful about looking to cigarette taxes to solve any state budget deficits,” said Michael D. LaFaive, Mackinac Center director of fiscal policy and the study’s co-author in the press release. “Few people realize the vast array of unintended consequences, such as theft and violence, inflicted on job providers, consumers, police and other innocent victims.”

So in LaFaive’s opinion, we should lower the tax instead of fighting the crime of smuggling?

It makes you wonder how much money the Mackinac Center gets from the tobacco industry. Instead of spending more money for enforcement, it wants to lower the tax. Smoking costs the state billions of dollars in health care costs, and the cigarette tax does not come near covering it.

The Mackinac Center has been a major proponent of privatization, right to work for less laws and doing away with the prevailing wage in Michigan, and all of their reports seem to reach those same conclusions time after time. It now appears to be adding lowering cigarette taxes to its causes.

The largest conservative think tank in Michigan, and one of the largest in the nation, is financed by such rightwing sources as the Dick and Betsy DeVos Foundation, the Richard and Helen DeVos Foundation, the Daniel and Pamella DeVos Foundation, the Jay and Betty Van Andel Foundation and the Edgar and Elsa Prince Foundation.

The fact is Michigan loses $127 to $140 million in tax revenue every single year through illegal cigarette smuggling that is destined for the School Aid Fund and Medicaid, yet we have only about four officers of the Michigan State Police Tobacco Smuggling Unit to cover the entire state.

Almost two years ago a Michigan company introduced a way to recoup the much needed lost tax revenue and stop the illegal activity.
Wyoming-based R.E.D. Stamp Inc. has patented and is marketing a Cigarette Tax Stamping Machine that will put a dent in smuggling and help Michigan recover 25 percent of the lost revenues and put $32 million back into Michigan’s coffers.

Getting away with cigarette smuggling is far too easy. Forging the tax stamp on the bottom of a package cigarette is fairly easy, as well of the theft of the stamp.

The fairly unsophisticated stamps are sold to Michigan’s 60-70 cigarette wholesalers in a roll of 30,000 stamps costing $60,000 that resembles a roll of paper towels. Organized crime has gotten involved by either buying them on the black market, stealing them off the UPS truck or even strong arm robbery from the truck. They are applied using heat transfer, similar to a cool iron on transfer for your t-shirt.

R.E.D. Stamp has teamed up with Authentix, a leading product authentication, to produce a system that is foolproof. The stamps can be downloaded digitally, eliminating the need and risks of shipping them to the wholesaler. The machine can transfer the stamps to the cigarette packs at a speed of 90 cartons of cigarettes a minute.

Plus, the stamps are almost impossible to forge, and it makes it easier for law enforcement to spot smuggling. The officer can use a small, handheld device that resembles the device that sets your car alarm that the officer can scan the pack with it.

It will give a simple yes or no. A larger handheld unit that reads the bar code and can tell where and when the pack was purchased and other information is also available.

Why isn’t the Mackinac Center advocating for this system instead of a lowering of a tax on a product that cues so much harm? According to their logic, we should do away with laws against robbery because thieves may be tempted to steal.

Illegal cigarette smuggling is costing Michigan millions in lost revenue

LANSING -- Michigan loses $127 to $140 million in tax revenue every single year through illegal cigarette smuggling that is destined for the School Aid Fund and Medicaid, but a Michigan company has a solution to stop the bleeding and illegal activity.

Wyoming-based R.E.D. Stamp Inc. has patented and is marketing a Cigarette Tax Stamping Machine that will put a dent in smuggling and help Michigan recover 25 percent of the lost revenues and put $32 million back into Michigan’s coffers.

The problem is Michigan’s $2 a pack cigarette tax is one of the highest in the nation, and Michigan is fifth in the nation for the highest rate of cigarette smuggling. The whole system is ripe for abuse.

Michigan border states have much lower tax rates; Illinois at 98 cents a pack and Indiana at 99.5 cents a pack. People cross the border to buy cartons for personal consumption, costing border retailers sales and the state tax revenue. Some people cross the border to buy cartons by the trunk load and either sell them out of the trunk of their cars to individuals or to less than honest retailers.

It’s even done on a larger scale, and even organized crime and private entrepreneurs are involved. A truckload of 500 cartons shipped from Kentucky where the tax is just 30 cents a pack or Missouri at a mere 17 cents a pack to Michigan could net a smuggler a tidy profit of more than $8,000.

Getting away with it is also pretty easy. There are currently only four members of the Michigan State Police Tobacco Smuggling Unit to cover the entire state. Forging the tax stamp on the bottom of a package cigarette is fairly easy, as well of the theft of the stamp.

The fairly unsophisticated stamps are sold to Michigan’s 60-70 cigarette wholesalers in a roll of 30,000 stamps costing $60,000 that resembles a roll of paper towels. Organized crime has gotten involved by either buying them on the black market, stealing them off the UPS truck or even strong arm robbery from the truck. They are applied using heat transfer, similar to a cool iron on transfer for your t-shirt.

R.E.D. Stamp has teamed up with Authentix, a leading product authentication, to produce as system that is foolproof. The stamps can be downloaded digitally, eliminating the need and risks of shipping them to the wholesaler. The machine can transfer the stamps to the cigarette packs at a speed of 90 cartons of cigarettes a minute.

Plus, the stamps are almost impossible to forge, and it makes it easier for law enforcement to spot smuggling. The officer can use a small, handheld device that resembles the device that sets your car alarm that the officer can scan the pack with it.

It will give a simple yes or no. A larger handheld unit that reads the bar code and can tell where and when the pack was purchased and other information is also available.

The problem is it will cost about $11 million to replace the 85 older machines, but because of the speed of the new machines I don’t think they will need that many. Plus, the estimated $32 million it will bring in more than pays for the new machines in just the first year. The Michigan Distributors and Venders Association supports the concept, but they want help with purchasing them. Adding a few more boots on the ground and an increase to the Tobacco Smuggling Unit should bring even more money when coupled with the machines.

But the real hang-up is from the Michigan Department of Treasury, and according to the subscription only Gongwer treasury department officials said it did not have any studies that it trusts that “show how much smuggling and counterfeiting of tax stamps is happening.” I’m not sure what world they are living in, but there are a few reports out there.

Rightwing think tank the Mackinac Center for Public Policy recently released a study that proves the smuggling and an extensive report by the Detroit Free Press on March 14, 2008 prove Treasury wrong.