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While smoking is not as “in vogue” as it once was, a recent report from the Tax Foundation says higher tax rates on cigarettes incentivize smuggling and as tax rates increase, consumers and suppliers search for ways around these costs. They point out that, when it comes to cigarettes, consumers tend to shop across borders where the tax rates are lower and dealers develop black and gray markets to sell illegally to consumers, paying little or no tax at all. They say cigarette smuggling is both a national problem and a lucrative criminal enterprise. Citing data from a partnership with Michigan’s Mackinac Center for Public Policy, they have estimated smuggling rates for each US state (and DC) as recent as 2022. Not surprising, their data shows that when states increase their cigarette taxes, smuggling rates increase.
Click here to read the full report at the Tax Foundation.
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