How regulations grow

In the modern regulatory environment, fair competition is assured not by lowering taxes but by raising them on everyone.

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    Cigarette World salesman James Colby takes a break and smokes outside of his store in Sunnyvale, Calif., in this file photo from May 2005. A tax loophole makes self-rolled cigarettes cheaper than the pre-rolled variety. Will new regulations arise to close the loophole?
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The WSJ today runs a story on cigarette rolling machines that illustrates how the regulatory state can count on private enterprise to lobby for ratcheting up regulations.

It seems that there is a tax loophole that permits role-your-own smokes to be taxed at a far lower rate than what used to be called ready-roll cigarettes. So, no surprise, there are machine popping up everywhere that enable consumers to buy rolled-on-the-spot cigarettes for less than half the price of regular, pre-rolled smokes.

And guess who is unhappy about that? The industry leaders. “We are complying with the law, but some companies are not doing so in order to gain an unfair advantage,” said Ron Bernstein, chief executive of Liggett Vector Brands Inc., a unit of Vector Group Ltd. that is the fifth-largest U.S. cigarette maker by sales.

Therefore, fair competition is assured, not by lowering taxes but by raising them on everyone. A similar story can be told about how health-care mandates were universalized in American business. The minimum wage too. Once the dominant players have absorbed the costs of the state, they lobby for the costs to be imposed on their competitors too.

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