Tuesday, July 21, 2009

Monday, July 20, 2009

Arbitrage in Flavor Country

One of the hazards of levying excessive excise taxes at the state level is that, in some cases, smugglers can take advantage of arbitrage. This is not such a problem with a commodity like gasoline. Sure, Georgia may have lower excise taxes on gas (and thus, a lower price) than Florida. But, it is almost impossible for a third-party to profit off of this differential, since gasoline is difficult to transport and sell outside of a designated service station.

Cigarettes, however, are another matter. The Wall Street Journal reports:
States across the U.S. have been taking a harder line against an old problem -- cigarette smuggling -- as part of the widening search for solutions to their budget problems.

States including Florida, Maryland, Michigan, New York, Rhode Island and Virginia this year have stepped up law-enforcement efforts with the aim of recouping taxes lost to bootleg cigarette sales.

Studies indicate states are losing about $5 billion annually in tax revenue because of illegal tobacco sales, said Phil Awe, who heads the tobacco-diversion division of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

"We do not want to have our tax laws ignored and lose tax revenue from legitimate sales of cigarettes," Maryland State Comptroller Peter Franchot said of the crackdown. He estimates that his state is losing "hundreds of thousands of dollars" annually.

Even worse, organized crime is replacing what was once "mom-and-pop" smuggling operations:
In one recent case, an undercover investigation by the New York State Department of Taxation and Finance led to the arrests of 18 residents of Nassau and Queens counties. Investigators from the tax department posed as cigarette bootleggers and sold illegal, untaxed cigarettes to a network of store owners, including two 7-Eleven operators. The operation cost state and local governments $2.1 million in uncollected taxes.

Sunday, July 12, 2009

*Time* Magazine on Homosexuality, 1966

Fascinating throughout, but this passage is especially eye-popping:

The once widespread view that homosexuality is caused by heredity, or by some derangement of hormones, has been generally discarded. The consensus is that it is caused psychically, through a disabling fear of the opposite sex. The origins of this fear lie in the homosexual's parents. The mother—either domineering and contemptuous of the father, or feeling rejected by him—makes her son a substitute for her husband, with a close-binding, overprotective relationship. Thus, she unconsciously demasculinizes him. If at the same time the father is weakly submissive to his wife or aloof and unconsciously competitive with his son, he reinforces the process. To attain normal sexual development, according to current psychoanalytic theory, a boy should be able to identify with his father's masculine role.

Fear of the opposite sex is also believed to be the cause of Lesbianism, which is far less visible but, according to many experts, no less widespread than male homosexuality—and far more readily tolerated. Both forms are essentially a case of arrested development, a failure of learning, a refusal to accept the full responsibilities of life. This is nowhere more apparent than in the pathetic pseudo marriages in which many homosexuals act out conventional roles—wearing wedding rings, calling themselves "he" and "she."

I think many (probably older) people would still secretly nod at this passage. This is the mentality that will have to (literally) die out before our "pathetic pseudo marriages" become happy legal ones.

[HT: Tyler Cowan]