The United States of Cigarette Smuggling
Some 56.9 percent of the cigarettes consumed in New York state are smuggled in from another state. That's a bigger percentage than any other state, according to a ranked map put together by analysts at the Tax Foundation. The states with the next highest inbound smuggling are Arizona (51.5 percent), New Mexico (48.1 percent), Washington state (48 percent), and Wisconsin (34.6 percent).
Cigarette smuggling is pervasive in large part because of the high cigarette taxes some states impose. The sizable differentials between higher-tax states and their lower-tax counterparts, especially when those lower-tax states are nearby, creates a big incentive to run cheap, low-tax smokes across borderlines.
So it's not surprising to find that New York is not only the state with the most inbound smuggling but the state with the highest tax: $4.35 per pack—with an additional $1.50 tacked on if you're lucky enough to live in the Big Apple. According to the Tax Foundation, both smuggling and cigarette taxes have risen rapidly in New York during the last eight years. The rate of taxation is up 190 percent; smuggling has risen 59 percent over the same time frame.
How does your state stack up in the cigarette smuggling rankings? Check the Tax Foundation's handy map to find out:
Higher cigarette taxes make legally purchased packs more expensive. But they don't always lead to the gush of new revenue that legislators expect when those taxes are passed, in part because of smuggling. When states count on that revenue (and spend it) before it actually comes in, they sometimes find themselves with budget holes as a result.
We've seen the same thing happen with the states involved in the Master Settlement Agreement (MSA) with the big obacco manufacturers: States basically partnered with cigarette makers in exchange for a share of the revenue stream, which would then be used to fund public health programs. But when the revenue started to fall, states were left struggling to pay for the programs they'd intended to fund with MSA money.