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1 Scott Drenkard & Joseph Henchman, Cigarette Taxes and Cigarette Smuggling by State, 2014 1 (2017)

handle is hein.taxfoundation/cigtxsmu0001 and id is 1 raw text is: TAXS FOUNDATION FISCAL FACT No. 537 Jan. 2017 Cigarette Taxes and Cigarette Smuggling by State, 2014 By Scott Drenkard and Joseph Henchman Economist, Vice President, Director of Legal & State Projects State Projects Key Findings: Excessive tax rates on cigarettes approach de facto prohibition in some states, inducing black and gray market movement of tobacco products into high tax states from low tax states or foreign sources. New York has the highest inbound smuggling activity, with an estimated 55.4 percent of cigarettes consumed in the state deriving from smuggled sources in 2014. New York is followed by Arizona (49.6 percent of consumption smuggled), New Mexico (46.2 percent), Washington (45.2 percent), and Minnesota (35.5 percent). New Hampshire has the highest level of outbound smuggling at 81.1 percent of consumption, likely due to its relatively low tax rates and close proximity to high tax states in the northeastern United States. Following New Hampshire is Idaho (24.8 percent outbound smuggling), Virginia (24.4 percent), Delaware (23.9 percent), and Wyoming (21.2 percent). Following a cigarette tax increase from $2.51 to $3.51 in midyear of 2013, Massachusetts has seen a substantial increase in cigarette smuggling. Since the last year's edition of this report, the state has jumped from 12 percent inbound smuggling to 29.3 percent inbound smuggling, the seventh highest in the country. Cigarette tax rates increased in 31 states and the District of Columbia between 2006 and 2014. The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non profit organization. ©2017 Tax Foundation Distributed under Creative Commons CC BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org

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