State Cracks Down on Cigarette Tax Avoidance

Washington State has one of the highest cigarette tax rates in the nation-- just over $2 a pack. Smokers are reacting to the higher tax rate in two ways. Some are cutting back their cig consumption or quitting outright-- which is what some folks think a cigarette tax hike is supposed to do in the first place. But, people being people (and addicts being addicts), others are finding they would rather just not pay the tax-- and are buying cigarettes tax-free over the Internet.

The big news in Washington this week is that the state is making efforts to prevent cigarette tax cheating. One Washingtonian is making headlines for owing $8,000 in cigarette taxes on his Internet purchases-- which presumably means he bought a breathtaking 4,000 packs of cigarettes without paying the tax. The headlines might make state tax administrators cringe, but they shouldn't. Tax laws are made to be enforced-- and when tax enforcement efforts are this visible, it's usually because lawmakers have made bad fiscal policy decisions.

In particular, Washington State is losing an estimated $200 million a year in cigarette tax revenues because state lawmakers didn't have the stomach for needed tax reforms like repealing excessive property tax caps and instituting an income tax, and instead decided they'd tax smokers as much as they could. The higher tax rates go, the further people will go to avoid them. And state tax administrators are left to clean up the mess.

So when you see headlines about smokers have a quarter of their wages garnished to pay unpaid cig taxes, don't blame the enforcement behavior of the state tax department. Blame the tax cheats, of course, for deciding they're immune to the laws the rest of us follow. But don't forget to pin this one on your elected official, for taking the easy way out and relying so heavily on the cig tax to begin with.