Washington is on the verge of making a mistake with proposed legislation that would raise Washington’s cigarette excise tax by $2 per pack to more than $5. This would result in a 23-percentage-point increase in cigarette tax evasion and avoidance, an unintended consequence the state should avoid.

We recently published a study that measured the degree to which cigarettes are trafficked among the 48 contiguous states, as well as to Canada and from Mexico. Through 2023, we found that 35% of total cigarette consumption in the Evergreen State was a function of tax evasion or avoidance — what we call smuggling. This ranked Washington fifth-highest in the nation, behind California, New York, Massachusetts and New Mexico. If House Bill 2382 becomes law, we estimate cigarette smuggling in Washington will leap to 58% of total consumption.

Because of the state’s budget deficit, the bill is regarded first as a revenue measure more than a public health law. But the state should not expect the tax hike to generate significant revenue. We calculate that the 66% increase would yield a revenue increase of only 9%, or $24 million.

The bill dedicates just $2 million of the expected new revenue to additional nicotine and tobacco enforcement. This would not stop even a fraction of the additional 31 million packs we expect to be smuggled into Washington. It is unlikely that any amount of money could do so. The state struggles to keep contraband — including nicotine — out of its prisons and jails. So how effectively can it keep smuggled cigarettes out of a free society?

A casual smuggler typically crosses into a lower-tax jurisdiction to save money on cigarettes for personal consumption. Organized or “commercial” smuggling involves large-scale, long-haul and organized crime. We estimate each category contributes about 50% to the total smuggling rate.

At more than $5.00 per pack, the cigarette tax means Washington would be surrounded by states with lower tax rates. Idaho charges only 57 cents per pack. The large tax gap is an open invitation for Washington consumers to buy cigarettes in Idaho. Lawmakers may think we overstate this case, but there is plenty of evidence identifying cross-border shopping (and smuggling) even when huge tax differentials don’t exist.

In 2009, Washington had to contend with detergent smugglers after it imposed limitations on phosphate use. Costco in Coeur d'Alene, Idaho reported a 10% increase in detergent sales and pointed to Spokane, Washington shoppers as the source.

Detergent smuggling may seem funny, but cigarette smuggling is not. Smuggling undermines revenue and health goals while bringing a host of other unpleasant consequences. We have over the years catalogued examples of murder-for-hire, public corruption, violence against police and property, and brazen thefts including smash and grabs and truck hijackings.

In addition to individuals crossing a border to buy cheaper cigarettes, there are criminal organizations that smuggle large amounts over long distances, whether they originate from Wyoming or overseas.

On the west side of the state the Pacific Ocean is not a barrier to smuggling but a likely facilitator. The state is home to 11 deep draft cargo ports and nearby bonded warehouses. Bonded warehouses are tax-free weigh stations where cigarettes and other nicotine products can be peeled off into local markets. Transnational smuggling is a global problem. It would be naïve to think that illicit products from overseas don’t pass into Washington via its many ports. Our model estimates that about 50% of smuggled cigarettes trafficked into Washington arrive from locations that are not simply next door.

All of this might be worth it if there were a major health payoff. This is unlikely to happen because those in Washington who still smoke at a tax rate of $3 per pack have a very strong preference for doing so. A 2012 study suggests that cigarette taxes must be doubled to reduce smoking by just 5%.

Supporters of this bill hope it will help close a budget hole, but they should think twice about imposing a 66% increase in Washington’s excise tax rate. Smuggling will undermine both revenue and health goals while creating costly consequences for taxpayers, citizens, and law enforcement.

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