Alcohol Smuggling Costs Taxpayers

Michigan loses $14 million every year because of the illegal transportation or smuggling of alcoholic beverages into the state, according to a report from the Michigan Liquor Control Commission and the Michigan Authorized Distribution Agents.

The report recommends that the state hire more law enforcement agents and purchase X-ray machines and barcode scanning equipment to help apprehend those who bring alcohol illegally into Michigan. Both of these proposals, especially hiring more law enforcement agents, would be expensive.

There's an easier and more effective approach that doesn't require hiring anyone or buying more equipment. In fact, it costs nothing and would increase tax revenue substantially.

Simply lower taxes on alcoholic beverages. It's that simple. Smuggling alcohol then becomes considerably less profitable and not worth the risks, including heavy fines imprisonment.

After Canada raised its tax on cigarettes sharply, it became so highly profitable to smuggle cigarettes into the country that tax revenues dropped. The high tax promoted smuggling and the government lost all the taxes on the smuggled cigarettes.

As soon as Canada lowered its tax on cigarettes, bootlegging dropped and tax revenues increased.

 

Reference:

  • Lane, Amy. Liquor smuggling costs state $14 million a year. Crain's Detroit Business, January 28, 2008.

filed under: Economics

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