High Taxes on Cigarettes Increase Smuggling

New study looks at national rates

High taxes on cigarettes lead to high rates of smuggling, according to new research by the Mackinac Center for Public Policy and the Tax Foundation.

The update to previous research on cigarette taxes and smuggling was published in December and supported previous research finding that high taxes increase the rates by which people illegally move cigarettes across borders. According to Moody on the Market:

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The authors estimated total smuggling rates by comparing the published smoking rates of adults in 47 states to the legal paid sales of cigarettes in those states. The difference between the two is attributed to smuggling.

Michael LaFaive is the Director of the Morey Fiscal Policy Initiative at the Mackinac Center here in Michigan. He says, “It’s important for policymakers to understand that cigarette tax increases typically lead to increased rates of smuggling.” LaFaive is a study coauthor, and he adds, “Cigarette smuggling is often associated with increased violence and other crimes, and these factors should be considered when lawmakers debate cigarette tax increases.”

Michigan has seen its smuggling rate drop, LaFaive told WSJM.

We were ranked tenth in the nation overall for the amount of inbound smuggling that’s occurring in Michigan, but we’ve dropped to 12th, so our position is getting better, and I expect that to continue getting better as states raise taxes.

New Hampshire, because it is surrounded by states with high excise taxes, is the state that sees the most cigarettes smuggled out, according to a report by WIRX. New York’s high cigarette taxes have led it to be the state with the highest rate of goods smuggled in.

Read the article at Moody on the Market.

Read the report on WSJM.

Read the report on WIRX.

Read more about the study.


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