Cigarette Taxes and Smuggling cover
The 2008 edition of the Cigarette Taxes and Smuggling study is available online at s2008-12

The Mackinac Center for Public Policy’s original research into how cigarette taxes impact smuggling and other unintended consequences continues to draw interest around the nation. Mackinac Center scholars Michael LaFaive and Todd Nesbit have both recently presented Center findings at separate events.

For the uninitiated, the Mackinac Center published a statistical analysis in 2008 designed to measure the degree to which cigarettes are smuggled in 47 of the 48 contiguous states. Originally, the model was designed only to measure smuggling in a few states. The model wouldn’t work without more to measure, so the Center fed its model with data from all but one of the 48 contiguous states.

The result was that the Mackinac Center — a state-based research institute — created a study with national implications. Our work has been used across the country by law enforcement, revenue officials, media and individuals ever since, and we have updated that model on three occasions.

Recently, two groups — the Council of State Governments and the Federation of Tax Administrators — asked Mackinac Center experts to present (and if necessary, defend) these findings before audiences in Anchorage, Alaska, (CSG) and Knoxville, Tenn., (FTA). The CSG works to achieve “excellence in state governments to advance the common good, is non-partisan and serves all three branches of government, according to its website. The Federation of Tax Administrators works to provide assistance to state-based taxing authorities, such as state treasuries.

The first, which I attended, included a presentation followed by a panel discussion, which I moderated. That panel included members of the Virginia State Crime Commission, two members from law enforcement (one retired) and two members of Rhode Island’s state Legislature. The panel painted an ugly picture of the illicit trade in cigarettes, especially on the east coast.

The second, attended by Nesbit, involved a PowerPoint presentation and relatively lengthy question and answer session. Tax administrators are often questioned about Mackinac Center findings and this event gave them the opportunity to better understand our measuring techniques and agree or disagree accordingly.

The Center’s most recent edition — which contains data through 2012 — estimates that 27.6 percent of all cigarettes consumed in the Great Lake State are smuggled.

We will release our latest findings before the end of 2014.