Cigarette Study Shows High Smuggling Rates

Cigarette graphic

The Mackinac Center for Public Policy released the fifth edition of its popular cigarette tax and smuggling study — performed this year in concert with the Tax Foundation — on Jan. 14. It reported that 25 percent of Michigan’s cigarette consumption was due to tax evasion and avoidance.

The model found that New York State was once again the No. 1 smuggling state in the nation, with 58 percent of its market built from either tax evasion or tax avoidance behavior.

Rounding out the top five states were Arizona, Washington, New Mexico and Rhode Island. Michigan ranked 10th overall. On the opposite end of the spectrum, we found that New Hampshire had an outbound smuggling rate of nearly 29 percent. That is, for every 100 cigarettes consumed in that state, an additional 29 were smuggled out.

The Mackinac Center’s study was not the only one released this year that contained state-by-state estimates. The Institute of Medicine and National Research Council published “Understanding the U.S. Illicit Tobacco Market: Characteristics, Policy Contest, and Lessons from International Experiences.”

That study reports a national range of smuggling rates from a low of 8.5 percent (the authors’ own estimate) to a high of 21 percent. The same report used Mackinac Center data to calculate a national smuggling rate — something we did not do for our publication — of 13.5 percent.

The Mackinac Center’s report has been well received in national news stories and has been part of cigarette tax debates in both Minnesota and Ohio. In just seven weeks, one of the authors alone completed 22 interviews with reporters from the Wall Street Journal, Associated Press and Seattle Weekly, to name a few. Data from the study was also used in a recent edition of the highly respected Economist magazine.