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How was smuggled tea more expensive? The shipping costs for both products would be the same (right?), so the price differentiator should be the presence/absence

How was smuggled tea more expensive? The shipping costs for both products would be the same (right?), so the price differentiator should be the presence/absence of additional government charges. Unless smuggled tea had to accept more losses due to…piracy?

ceejayoz 1y ago
> How was smuggled tea more expensive? Smuggling adds costs, and the Dutch/British product weren't identical in quality either. The Tax Act reduced the tax/cost burden (removing a requirement to go through London-based middlemen first, and lessening import duties) on legitimate tea. > The shipping costs for both products would be the same (right?) Not at all. The risk of seizure (of both cargo and ship) drives it way up.
ramesh31 1y ago
Economies of scale can make a legal product much cheaper even with heavy taxation. See cigarettes for example. No one runs an illicit tobacco farm in the US because you just can't match the scale to make it profitable. Similar things happening with cannabis now; in parts of the west coast supply is so high that it would be more profitable for small time operators to grow heirloom tomatoes at this point.
- 0cf8612b2e1e 1y ago
  Cigarettes is exactly what I was thinking of for comparison. Most of the price is sin taxes. Remove those and the actual product costs nearly nothing to make. Sales of loose cigarettes is still a thing today where people are moving them from reservations or foreign countries.
  - ceejayoz 1y ago
    Smuggled Dutch tea was something like 80% of the tea on the market. https://en.wikipedia.org/wiki/Tea_Act https://en.wikipedia.org/wiki/Tea_Act > Smuggled tea was a large issue for Britain and the East India Company, since approximately 86% of all the tea in America at the time was smuggled Dutch tea. That's not the case for cigarettes. If it were anything like that percentage, you can bet the Feds would care more.

ceejayoz 1y ago

> How was smuggled tea more expensive? Smuggling adds costs, and the Dutch/British product weren't identical in quality either. The Tax Act reduced the tax/cost burden (removing a requirement to go through London-based middlemen first, and lessening import duties) on legitimate tea. > The shipping costs for both products would be the same (right?) Not at all. The risk of seizure (of both cargo and ship) drives it way up.

ramesh31 1y ago

Economies of scale can make a legal product much cheaper even with heavy taxation. See cigarettes for example. No one runs an illicit tobacco farm in the US because you just can't match the scale to make it profitable. Similar things happening with cannabis now; in parts of the west coast supply is so high that it would be more profitable for small time operators to grow heirloom tomatoes at this point.

0cf8612b2e1e 1y ago
Cigarettes is exactly what I was thinking of for comparison. Most of the price is sin taxes. Remove those and the actual product costs nearly nothing to make. Sales of loose cigarettes is still a thing today where people are moving them from reservations or foreign countries.
- ceejayoz 1y ago
  Smuggled Dutch tea was something like 80% of the tea on the market. https://en.wikipedia.org/wiki/Tea_Act https://en.wikipedia.org/wiki/Tea_Act > Smuggled tea was a large issue for Britain and the East India Company, since approximately 86% of all the tea in America at the time was smuggled Dutch tea. That's not the case for cigarettes. If it were anything like that percentage, you can bet the Feds would care more.