A news service for the people of Michigan from the Mackinac Center for Public Policy

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High Taxes Make Cigarettes 'Gold Bars' For Thieves

Government has helped make cigarettes more valuable by imposing $2 per pack tax

Estimated cigarette smuggling in Michigan

Early Sept. 13, three men involved in a robbery tried to run over a Warren police officer in a minivan that, according to police, had an estimated $10,000 worth of merchandise. Two of the men were shot trying to flee.

However, the loot wasn't cash or jewelry. Instead, police said they were after cigarettes, which Michael LaFaive, fiscal policy analyst at the Mackinac Center For Public Policy calls "gold bars."

"It happens all the time," said Lt. Heidi Metz of the Warren Police Department. "Almost all tobacco stores have security systems. They've been targeted."

They have been targeted, LaFaive said, because the high taxes on cigarettes inflates their value.

In 1947, Michigan’s cigarette excise tax rate was three cents a pack, which when adjusted for inflation would be 31 cents today. The cigarette tax in Michigan is $2 a pack.

"Cigarettes are often more attractive to robbers than cash registers and safes because they don't need to be opened or unbolted from counters," LaFaive said. "A window is smashed and cigarettes are lifted. The incentive here is provided by lawmakers who have helped make them more valuable to thieves than they would otherwise be through tax policy. By artificially lifting the price of cigarettes by $2 a pack lawmakers stimulate demand by thieves for trafficking in the stolen product. This also increases the attractiveness of robbing wholesalers and retailers because the state-mandated tax stamp (evidencing taxes have been paid) is already on the smokes. That makes it easier to pass them off elsewhere as the Real McCoy."

With some of the highest cigarette taxes in the nation, it is estimated that 29 percent of cigarettes in Michigan are smuggled.

Dale Brown, commander of Detroit private security company, CSG Security, said protecting cigarette distributors has become their "bread and butter."

"These cigarette distributors in this region hire staff as bodyguards for their trucks making deliveries," Brown said. "The only reason they afford this expense is because they have to."

Brown said cigarette deliveries need private protection or the trucks will be robbed.

"You turn your head for a minute, they are on you," he said. "They are going to strike. They are going to get robbed, guaranteed. It's definitely lucrative. It's an unprotected resource of a high value product that can easily be redistributed and sold elsewhere. The level of violence also increased."

For example, Admiral Discount Tobacco stores were robbed at gunpoint in May in Wyoming and in Manistee County in January of 2012, according to media reports. 

A spokeswoman for Admiral Tobacco store refused to comment.

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See also:

High Cigarette Tax Leads to Smuggling

Study: High Cigarette Taxes Cause Widespread Smuggling in Michigan, Elsewhere in U.S.

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