The California Foundation for Commerce and Education report on The State and Local Impact of Tobacco Prices on Smuggling and Black Market Sales found that, by failing to account for smuggling, proponents overestimate tax revenue from tobacco products by $500 million annually due to smuggling caused by the tax increase. “In addition, lost legitimate retail sales will eliminate approximately 11,000 direct retail jobs,” it concluded.
“The literature suggests that the $2 excise tax increase may create the unintended consequence of increasing organized crime in California,” the study found.
Ah! The old UC! Unintended Consequences!