The Mackinac Center first took a focused interest in cigarette smuggling in 2002 when one of its scholars — James Damask — published a short essay about men who had been arrested for reselling in Michigan large amounts of cigarettes originally purchased in North Carolina. Those arrests revealed that a portion of their smuggling profits were being used to assist the Hezbollah, a group officially designated as a terrorist organization by the U.S. government.
Subsequent anecdotal evidence about smuggling in Michigan and elsewhere led us to explore a full study of the relationship between cigarette tax rates and smuggling rates, including estimates for each state’s rate of smuggling. The study, released in 2008 and using data from 2006, included a statistical model to measure two types of smuggling: casual and commercial. Casual smuggling involves individuals who cross into another state or taxing jurisdiction to acquire cigarettes at a lower cost, typically for personal consumption. Commercial smuggling involves larger, long-haul shipments of cigarettes, say a van or semi-tractor trailer moving cigarettes from North Carolina to Maryland or Michigan. We published updates to this analysis in 2010, 2013, 2014, 2015 and now 2016.