There's no better example of the law of unintended consequences than cigarette taxes in the United States.
Each state sets its own rate, and the disparity is huge. Missouri's state cigarette tax is 17 cents. It's $4.35 in New York.
What's the unintended consequence? Crime.
According to the Bureau of Alcohol, Tobacco, Firearms and Explosives, the United States loses $5 billion in tax revenue every year from the trafficking of illegal cigarettes. Worldwide, it's a $100 billion problem, and it's the No. 1 economic crime in Europe.
"We liken it to the new prohibition era," Special Agent Ashan Benedict told CNBC for the upcoming documentary Cigarette Wars . "We haven't outlawed cigarettes yet, but it's taxed to the point where the criminals know they make a lot of money trafficking."
The crime has several variations, but it's extremely simple. The most common way: Buy cigarettes in a low-tax state and sell them in a high tax state. The tax disparity is straight profit.
"A carton of cigarettes in Virginia is $30," Benedict said. "In New York City, it can be $90 or more. That's just one carton.
"You start dealing with hundreds and hundreds of cartons, and folks are making more money selling cigarettes up north than drugs."
One truckload can translate into $1 million in cash.Page 1 of 3 | Next Page