If you’re a cigarette smoker in New York, odds are your purchase was illegally smuggled in from another state to avoid paying taxes.
A new study by the conservative Tax Foundation says that 56.9 percent of all cigarettes sold in New York were illegally imported from out of state sources. The foundation’s report says the surge in cigarette smuggling is directly correlated to New York’s tax of $4.35 per pack sold, the highest state cigarette tax in the nation. Cigarette taxes are even higher in New York City ($5.85 per pack).
“Public policies often have unintended consequences that outweigh their benefits. One consequence of high state cigarette tax rates has been increased smuggling as criminals procure discounted packs from low-tax states to sell in high-tax states,” the report reads. “Growing cigarette tax differentials have made cigarette smuggling both a national problem and a lucrative criminal enterprise.”
As recently as 2006, New York had only the fifth-highest smuggling rate. But in recent years, the state cigarette tax has jumped 190 percent. The smuggling rates jumped 59 percent during the same period.
According to the study, New York’s smuggling rates are closely followed by Arizona (51.5 percent), New Mexico (48.1 percent), Washington (48 percent) and Wisconsin (34.6 percent).
The American Lung Association criticized the study’s claims, pointing out that the data was collected by the Mackinac Center for Public Policy, a Michigan-based conservative think tank that has received funding from the tobacco industry. On its own website, the ALA says that higher state taxes on cigarettes have been shown to reduce overall smoking rates.
The group’s director of national policy, Thomas Carr, told CBS that the smuggling issue “is a lot smaller than the study lets on,” adding, "Tobacco companies are generally against higher tobacco taxes."
And despite the study’s numbers, it is difficult to place all of the blame for smuggling rates on taxes. Arizona is less than 5 percent behind New York in smuggling percentages, but the state’s $2 per pack tax is tied for 12th highest in the nation. New York is also an international trading hub, arguably giving smugglers more opportunities and potential buyers, for their product.
There’s also evidence suggesting that lower cigarette costs can directly contribute to smuggling. Ukraine sells the world’s cheapest cigarettes at $1.05 per pack and also contributes some $2 billion annually in tobacco smuggling, according to the Organized Crime and Corruption Reporting Project.
In the U.S., New Hampshire has the lowest inbound smuggling percentage in the nation, but its $1.78 tax per pack places it near the middle on the scale. Yet New Hampshire also smuggles out the highest percentage of cigarette packs (24.2 percent), according to the Tax Foundation study.