Lawmakers in several states have drawn on perspectives from the Mackinac Center as they consider proposals to raise excise taxes on cigarettes. The Mackinac Center has provided tax impact analyses, testimony and other useful information to state lawmakers and legislative committees.

Committees in Maine and Rhode Island held hearings in February on proposals to raise the per-pack cigarette tax by $1.00 and 50 cents, respectively. I provided testimony to various committees in both states. I later provided testimony in Montana and warned officials in the state of Washington about the prospective fallout of raising the tax by $2 a pack.

The Mackinac Center for Public Policy maintains a statistical model that estimates the degree to which cigarettes are smuggled from state to state, as well as into the county from Mexico and out to Canada. It includes data on the 48 contiguous states. Though we built the model for a 2008 Michigan-centric study, we update it every year. This makes it the go-to source for information on proposed cigarette tax hikes around the country.

We refer to “smuggling” as actions to avoid or evade a state’s cigarette tax. The model projects that Maine’s proposed tax increase would double the state’s smuggling rate to 14% of all cigarettes consumed. It also tells us that Mainers could be expected to smuggle 1.5 million more packs of cigarettes in from New Hampshire.

Rhode Island’s cigarette excise tax is already $4.50 per pack. The proposed tax increase of 50 cents would cause the state’s smuggling rate to reach 35% of consumption and lead to a net loss of revenue from the cigarette excise tax.

Washington’s proposal is perhaps the most dramatic. It already has a high cigarette excise tax of $3.02 per pack. The proposal would raise it to $5.02 per pack. Our estimate is that smuggling would leap to 59% of the marketplace from the current 37%.

Michigan’s cigarette tax rate is $2 per pack. There are no current proposals to raise it. The state’s smuggling rate wafted downward to 17% of the marketplace through 2022 (the latest year for which we have data). In 2006 the smuggling rate was more than 34% of total in-state consumption.

To read more about the Mackinac Center’s cigarette smuggling research, visit: www.mackinac.org/smokes.