Ball State University

Cigarette Tax Hike: Smuggling Up, Revenue Down

Cigarette Tax Hike: Smuggling Up, Revenue Down

Gov. Dannel P. Malloy has recommended raising the state cigarette excise tax by 25 cents to help close the budget deficit. Meanwhile, in Massachusetts late last year, a 70-year-old was arrested for allegedly smuggling smokes up from Virginia.

These two related news stories should serve as a warning, because every heavy-handed tax action has a reaction.

Why the connection? There is a clear and obvious link between taxes — specifically, tax differentials between states — and illicit behavior, including tax evasion and avoidance, theft, violence and public corruption. These were all hallmarks of the profitable trade in alcohol during Prohibition, and some states are still...