Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, recently co-authored an op-ed with Elizabeth Stelle, director of policy analysis at the Commonwealth Foundation, on the unintended consequences of high cigarette taxes.
Philly.com published their piece on October 14:
Just two years ago, Pennsylvania enjoyed a net cigarette smuggling rate of nearly zero, according to a statistical model designed by Michigan's Mackinac Center for Public Policy. That's the good news.
The bad news is that significant illegal cigarette trafficking already exists in Pennsylvania. In fact, more than 14 percent of all cigarettes consumed in the Keystone State in 2013 arrived via "commercial" smuggling - that is, illegal, long-haul, large shipments.
These illegal cigarette imports were offset by "exports," as individuals from states like New York came to Pennsylvania to buy cigarettes for personal use elsewhere. Such exports made up 12.6 percent of all cigarettes purchased in the state. Helping this exodus was the fact that New York tolerates a modicum of cross-border shopping for cigarettes, so not every border crossing is deemed illegal.
Unfortunately, raising the state excise tax by 62.4 percent - or more - would spike smuggling rates from zero to 20.3 percent, according to Mackinac's model. In other words, approximately one of every five cigarettes consumed in the commonwealth would be illicit. Not surprisingly, the overwhelming majority of these cigarettes would come from distant, low-tax states like Virginia and the Carolinas.
Read the full op-ed at philly.com.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited. Permission to reprint any comments below is granted only for those comments written by Mackinac Center policy staff.
Get insightful commentary and the most reliable research on Michigan issues sent straight to your inbox.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.