Business: More for Less

Canada, which has had singular success in maintaining a budget surplus, last week was demonstrating one way to get more government revenues: cut taxes. In April 1951, Canada increased its already high cigarette tax by 3¢ a pack, to 25¢. This gave the smuggling of cigarettes such a boost (an estimated 18% of legal sales) that annual revenues from the tax dropped $4,700,000 to $169.8 million. A year later, Canada removed the 3¢ tax increase; government revenues went up $9,400,000 for the year. But smugglers were still busy.

Last February Canada lopped another 4¢ from the tax. This time, manufacturers joined in,...

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