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Michigan Has 14th Highest Cigarette Smuggling Rate in the Nation


By The Mackinac Center for Public Policy

Originally posted on
Mackinac Center for Public Policy
www.mackinac.org

MIDLAND, Mich. — The Mackinac Center for Public Policy today released its annual estimate of state cigarette tax evasion and avoidance across the country.

As of 2019, New York and California had the highest inbound smuggling rate of all states at 52% and 44%, respectively. In other words, more than 50% of all cigarettes consumed in the Empire State are smuggled. Michigan’s inbound smuggling rate is 19%, or 14th among the states.

“This year’s study continues to show that illicit activity in the cigarette market is a major problem, especially in states with high cigarette taxes,” said Michael LaFaive, lead author of the analysis and senior director of the Morey Fiscal Policy Initiative at the Mackinac Center.

In 18 states, more smokes are smuggled out than smuggled in, making them prime sources of cigarettes for consumers seeking cheaper prices and organized crime cells seeking a profit. For instance, New Hampshire’s outbound smuggling rate is 71%, meaning that for every 100 cigarettes consumed an additional 71 are smuggled out to other states and Canada.

“Cigarette smuggling clearly helps consumers and organized crime save and make a buck,” added co-author Todd Nesbit, an economics professor at Ball State University. “Outright prohibitions on the product or higher taxes at the federal or state levels will only exacerbate this and other unintended consequences.”

The Mackinac Center has published its estimate in partnership with the Tax Foundation of Washington, D.C.

For an explanatory estimate and charts of all state smuggling rates see “America’s Illicit Smokes Market Set to Get Larger” at the Mackinac Center’s web site. Click here for an interactive map of state smuggling rates and estimates of state cigarette tax revenues lost or gained from smuggling.