State cigarette excise taxes vary around the country from a low of 17 cents per pack in Missouri to a whopping $4.35 per pack in New York (see map above, data here). Add another $1.50 per pack in New York city taxes, and a pack of Marlboros in Manhattan can now cost as much as $14, according to this recent New York Post article. As you might expect, those prohibitively high taxes have fueled a huge black market in New York, and the Post reported that "Illegal cigarettes are pouring into neighborhood bodegas by the truckload from neighboring Indian reservations, lower-tax states in the South and even as far away as China."
In a study to be released tomorrow by the Midland (MI)-based Mackinac Center for Public Policy on cigarette smuggling rates for 47 of the contiguous states, Director of Fiscal Policy Mike LaFaive and co-author of the study, estimates that 47.5% of cigarettes purchased in the state of New York during 2009 were smuggled. And that was before the $4.35 per pack tax went into effect in July. According to the Mackinac Center research, the top five states for cigarette smuggling in 2009 were:
Arizona (51.8 percent);
New York (47.5 percent);
Rhode Island (40.5 percent);
New Mexico (37.2 percent); and
California (36.3 percent).
Arizona's high smuggling rate can be explained by recent tax hikes there and its proximity to Mexico. Rhode Island's third place smuggling rank is likely due to its $3.46 per pack cigarette tax in 2010, second only to New York.
The new study is an update of the Mackinac Center's 2006 study "Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review." More details to follow once the final report is released publicly tomorrow.
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