Cigarette Taxes & Smuggling

The Mackinac Center for Public Policy has been studying cigarette smuggling rates since 2008. Our research, and that of other scholars and organizations, suggests that cigarette smuggling is a real problem in the United States. Policymakers should keep this in mind when considering how much to tax cigarettes.

Lawmakers often think that raising cigarette taxes are a “win-win” — generating more revenue for state government and improving public health by making it harder to legally purchase cigarettes. Studies suggest, however, that states with high excise taxes are more likely to have high cigarette smuggling rates, as the tax disparities among the states provide an opportunity to earn easy profits. Illegal smuggling deprives governments of tax revenue and encourages more people to participate in illicit, and often dangerous, markets.

Below is an interactive map which displays our most recent estimates of smuggling rates in 47 of the 48 contiguous states. A detailed description of the methodology used to create these estimates can be found in the studies that are also below.


Estimated Cigarette Tax Avoidance and Evasion by State, 2015

Michigan

Smuggling Rate
23.03% 12th in the U.S.
State Tax
200 cents per pack
Smuggled Packs
132,000,000 5th in the U.S.
Revenue Impact
-$264,000,000 6th in the U.S.

North Carolina is excluded from our estimate because it is the source state for our “commercial smuggling” calculations. Hawaii and Alaska were excluded due to the challenges of modeling states that are noncontiguous.

Articles

$1 Cigarette Tax Hike Helps Smugglers, Not Health Outcomes

Michael D. LaFaive and Todd Nesbit, Ph.D.

The Cost of High Cigarette Taxes

Chantal Lovell, Scott Drenkard, Michael D. LaFaive, Todd Nesbit, Ph.D., and Joseph Henchman

Indiana Could See Cigarette Smuggling Leap with Excise Tax Increase

Michael D. LaFaive and Todd Nesbit, Ph.D.

Cross-Border Effects of Cigarette Tax Increases

Michael D. LaFaive, Todd Nesbit, Ph.D., and Scott Drenkard

Real Cigarette Smuggling Anecdotes

Michael D. LaFaive, Todd Nesbit, Ph.D., and Scott Drenkard

High Taxes Make Cigarettes ‘Gold Bars’ For Thieves

Tom Gantert

High Taxes on Cigarettes Increase Smuggling

Michael D. LaFaive

There Will Be Harsh Consequences for Raising North Dakota’s Tobacco Tax

Michael D. LaFaive

Cigarette Tax Hike Initiative a Bridge Too Far

Michael D. LaFaive and Kerry Jackson

Smuggling Would Rise Along with Tobacco Tax

Michael D. LaFaive and Todd Nesbit, Ph.D.

Cigarette Tax Hike Will Increase Criminal Activity

Michael D. LaFaive

R.I. Cigarette Tax Hike Proposal to Cost State Money

Michael D. LaFaive and Todd Nesbit, Ph.D.


Video

As cash-strapped government looks to cigarettes for tax revenue, the public responds by more illegally transporting smokes across state borders. Smugglers and thieves target stores and businesses and the benefits to state coiffures and public health are questionable.