Ohio currently levies a cigarette tax of $1.25 per pack. The proposed tax hike of $1.25 per pack, to $2.50 per pack, is the largest of the four states we consider here.[72] Should the $1.25 tax proposal be adopted, the Buckeye State would see its total smuggling rate rise to 23.3 percent of the state’s consumption, up from a relatively modest 9.2 percent. This estimated smuggling rate increase would no doubt be fueled by the proximity of Ohio to states like Kentucky, which has a tax of only 60 cents[73] per pack.[*] Commercial smuggling, however, would make up the vast majority of the total smuggling that occurred in the state.
[*] For more on smuggling between Kentucky and Ohio see Richard Vedder, “Bordering on Chaos: Fiscal Federalism and Excise Taxes,” in Taxing Choice: The Predatory Politics of Fiscal Discrimination, ed. William F. Shughart II (Oakland, California: The Independent Institute, 1997), 271.
[72] Bauer, “Taxing Tobacco: Ohio Lawmakers Consider Hike in Statewide Rates,” The Marietta Times, Sept. 16, 2010, http://bit.ly/bg5pzv (accessed Nov. 2, 2010).
[73] “The Tax Burden on Tobacco: Historical Compilation, Volume 44, 2009” (Arlington, Va.: Orzechowski and Walker, 2009), 9.