There has been a lot of talk in America about raising taxes on consumer goods lately. The presidential candidate Herman Cain has been touting his 999 plan which proposes to create a 9% federal sales tax on all new goods sold in the USA. Also, some states are looking for ways to increase revenue from liquor sales; some of these plans involve raising liquor taxes.

Unfortunately none of the politicians proposing these taxes seem to be aware of the challenges that often come along with collecting this additional revenue (at least they are not admitting it publicly). We have to look no further than Ukraine to see that higher taxes increase smuggling and counterfeiting.
Smuggling is a very real danger for the states instituting additional liquor taxes as it is very easy for people traveling from one state to another to transport goods. There are no border checks between states, making it very easy for people to buy lower-priced liquor in one state and drive it over to another state to sell at a profit.

Counterfeiting is the more likely outcome of Cain's federal sales tax. Smuggling is a lesser danger because prices in Canada and Mexico don't usually differ that much from the USA and these countries already levy their own national taxes.  Therefore, in order to compete with the higher prices caused by a national sales tax, counterfeiting is the most efficient way.

Now we have outlined all the problems. What are the solutions? Machine-readable tax stamps have been shown to be very effective in generating revenue from consumer goods and decreasing smuggling and counterfeiting. Many countries in Europe have had success with this approach. 

The problem is that no one in the USA is talking about tax stamps or any other enforcement procedures for collecting these taxes. Heck no one has even uttered a word in the mainstream media about the challenges of collecting taxes on goods. There is no excuse for this when it comes to the liquor tax as we know the lengths criminals have gone to in Ukraine and other European countries to avoid paying these taxes.

Tax stamps may or may not be the right solution for Cain's sales tax and the new liquor taxes, but shouldn't they at least be part of the public discussion? It's not surprising that they are not. Tax stamps are an oddity in America, mostly associated with marijuana and cigarettes, which are at best taboo and at worst illegal. Maybe this is an opportunity for our industry to educate American politicians about tax stamps and their benefits.