Protectionism: It’s Positively Feudal

by Lynda Lambert
The "Tobacco Trafficking" law, like others before it, is not to restrict those who would commit truly illegal acts; it is simply a protectionist bill for the states.

There’s a new wave of economic protectionism being practiced in this country, both at state levels and at the national level in behalf of the states. In this time of international Free Trade agreements and a supposed Global Economy, governments are seeking to restrict trade between U.S. states.

What drew my attention to such goings-on was a bill passed by both the U.S. House and Senate, concerning “Tobacco Trafficking.” Quite frankly, it was that phrase that intrigued me. I asked myself, “Can you really call it trafficking when the product that is being shipped is legal?” I understand the idea of illegal sale of cigarettes, but trafficking? So, I investigated.

Quietly passed in the ending shadow of the Health Care debate, the "Prevent All Cigarette Trafficking Act of 2009" (H.R. 1676 and S.1147) was signed into law on March 31 of this year. What the law actually does is make it illegal to mail cigarettes through the U.S. Post Office.

The premise is that this law will stop the “smuggling” of cigarettes. Again, however, one must ask, “Can a legal product which is not being taken in or out of the United States be said to be 'smuggled'?” Maryland thinks so.

Some years ago, Maryland passed a law that made anyone who brings more than two packs of cigarettes across state lines a “smuggler” and a “tax evader.” Thus the time that I bought a carton of cigarettes in Virginia when I was visiting my sister and brought most of it back with me to Maryland, I was a smuggler! Amazing.

The use of such words as “trafficking,” “smuggler” and “tax evader” are rhetoric to mask the real purpose of such laws, which is restraint of trade. Limiting trade never has a good result, yet U.S. states have, apparently, a history of limiting trade with other states. An article written for the Journal of Farm Economics in 1940 protests the “fallacies and absurdities” of limiting interstate trade, and suggests, for proof, that the reader “ . . . examine the arguments advanced for margarine taxes in Wisconsin, protection to local beer in Michigan, restriction on shipments of milk into Rhode Island, or the exclusion of out-of-state fresh fruits and vegetables from farmers’ markets in Georgia” (Taylor, 41)

The "Tobacco Trafficking" law, like others before it, is not to restrict those who would commit truly illegal acts; it is simply a protectionist bill for the states, so that each might collect its respective tobacco taxes, which in my state, the State of Maryland, are usurious–essentially 3/4 of the retail price of each pack when you count in the federal tax, as well.

These taxes have already had a negative effect on tax collection in the state. According to an article published in the Baltimore Sun in March, “ . . . the $2-per-pack tax on cigarettes took effect Jan. 1, 2008. In 2007, there were 271 million packs sold. In 2009, there were only 199.7 million packs sold. . . . In 2008, though, as Maryland cigarette sales were falling, Pennsylvania sales increased by more than 7 million packs. Cigarette sales in the District of Columbia and West Virginia also increased from 2007 to 2008.”

If a person was buying wholesale through the mail because he cannot afford to buy retail, then, in response to this new law, he will simply stop buying at all—quitting the habit—or he will join others who have crossed state lines to buy somewhere where taxes are lower, or he will buy on the black market. Therefore, if people either quit or begin to buy elsewhere, the law will have little positive effect on tax revenues for the states. It will, however, force otherwise law-abiding citizens to act illegally.

This new law will also have deleterious effects on certain others.

By not allowing tobacco to be shipped by mail, this law denies the United States Post Office over $50 million in revenue per year, which they can ill afford to lose, and may, essentially, bankrupt the Seneca Nation, for which selling cigarettes by mail is a main source of revenue.

Although cigarettes and items having to do with cigarettes are a favorite whipping boy of the Maryland Assembly, with fully 11 House bills and 5 Senate bills in the last session posing some kind of restrictions—including the prohibition of “novelty lighters,” restraint of trade laws are not limited to cigarettes.

The State of Maryland’s last session also saw a bill (S. 556; H. 716) put forward which would have made it it illegal to ship wine through the mail. Though not yet passed, it is a bill that would truly cut off the nose to spite the face. It specifically would require, according to the bill’s summary, “ . . . establishing a direct wine shipper’s license to be issued by the Office of the Comptroller; requiring a person to be licensed before the person or the person’s agent may engage in shipping wine directly to a personal consumer in the State.”

The effect would be that Maryland residents would be prohibited from going online to purchase California wines from California and have them shipped to Maryland—unless that California winery or distributor had purchased the Maryland shipping license. This might bring the state some additional income in licensing fees, but the problem is it would also work the other way. What if every state in the union adopted such a trade-restrictive practice?

Maryland has a growing wine trade. We have some well-respected wineries in the state. They would not only have to buy Maryland’s shipping license, they would also be prohibited from mailing wine without buying 49 additional state shipping licenses. Not only would it be costly for their businesses, it would mean that if someone in California would like to have some Maryland wines sent to him through the mail, he cannot do that—unless a specific Maryland winery or distributor has bought the shipping license both for Maryland and California.

Instead of such ridiculous restrictions for the sake of licensing fees, the State of Maryland should promote wine sales to other states and thereby increase revenues of Maryland wineries. Being able to ship wine by mail could increase our wineries’ potential customers 49-fold, thereby increasing state income taxes.

States, apparently, would rather restrict than expand sales. They do not care if the product choices for the citizens in their states are limited; they do not care if businesses in and out of their states are compromised.

But states, apparently, don’t think that way. They would rather restrict than expand sales. They do not care if the product choices for the citizens in their states are limited; they do not care if businesses in and out of their states are compromised.

All this puts me in mind of Company Towns.

In the 19th century, the community in which I live, Hampden, was a little company town outside the borders of Baltimore City, a mill town in a valley filled with mills and other mill towns. People here worked for the mills, were forced to live in housing owned by the mills, and to buy goods from the mills’ company stores. It was positively feudal, and we are headed back in that direction. Only now it’s the states that are our feudal lords.

Wikipedia offers a simple definition of this feudal system, called "Manorialism or "Seigneurialism." It says, “Manorialism [is] characterized by the vesting of legal and economic power in a lord, supported economically from his own direct landholding and from the obligatory contributions of a legally subject part of the peasant population under his jurisdiction.”

We are the peasants. The question is, do we want to be?

Do we want our choices limited? Do we want to get to the point where we are only allowed to purchase things in our states, or, if we buy something elsewhere, are labeled “smuggler” or “tax evader,” or are forced to buy a license or pay a piggy-back tax once we bring it into our state, as we do in Maryland for cars bought elsewhere?

It is, I would venture to say, unconstitutional. Article 1, section 9, for instance, notes that “No law can give preference to one state over another.” This Article should have prohibited the passing of the Tobacco Trafficking law and, it seems to me, the Article also implies that states are not allowed to make laws that give their states preference over another. Doing so perverts the concept of a free republic and puts limits on our personal liberties.

The Maryland State Declaration of Rights, Article six states:

“Wherefore, whenever the ends of Government are perverted, and public liberty manifestly endangered, and all other means of redress are ineffectual, the People may, and of right ought to, reform the old, or establish a new Government; the doctrine of non-resistance against arbitrary power and oppression is absurd, slavish and destructive of the good and happiness of mankind.”

Protectionist laws fulfill that definition. As Kilmer noted in 1940, they are “absurd.” And there is no doubt that they are “slavish and destructive of the good and happiness of mankind.”

It’s time all states’ borders were open, and not just for tobacco and wine, but for health insurance and every other consumer item whose trade is currently restricted in any state. It is time, in other words, that the peasants revolt.

Lynda Lambert, a college English instructor, writes from Baltimore's Hampden community.


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This story was published in the Baltimore Chronicle on April 25, 2010.