From: lessgovt@gmail.com   
      
   Taxes Have Made New York Into an Empire of Cigarette Smuggling   
   By Todd Nesbit and Michael LaFaive, March 10, 2023, WSJ   
      
   New York has created a cigarette-smuggling empire, and the worst is yet to   
   come. It’s the unavoidable consequence of the state’s decadeslong history   
   of raising the cigarette tax, which Gov. Kathy Hochul wants to continue with   
   an additional levy of $1    
   a pack. She also wants to ban flavored cigarettes. This will only lead to more   
   lawbreaking and less tax revenue, defeating its purpose.   
      
   We have spent more than 15 years studying cigarette trafficking, comparing   
   legal paid cigarette sales in states with their published smoking rates. In   
   New York, there’s a huge discrepancy: Many more cigarettes are smoked than   
   bought—a clear sign of    
   tax evasion and avoidance. New Yorkers are buying cigarettes from illegal   
   sellers and crime syndicates, which don’t charge taxes. They also buy them   
   out of state, where taxes are lower. New York already imposes a statewide pack   
   tax of $4.35 a pack,    
   tied with Connecticut for highest in the nation (the District of Columbia’s   
   tax is $4.50). New York City imposes additional excise taxes of $1.50 a pack.   
      
   High taxes lead to large-scale smuggling. In 2020 we found that New York’s   
   smuggling rate exceeded 53%—the highest in the nation. That means more than   
   half of all cigarettes sold in New York were smuggled. From 2011 through 2020,   
   more smokes were    
   smuggled into New York than any other state.   
      
   Smuggling will soar even higher under Gov. Hochul’s proposal. We estimate   
   that if cigarette taxes are raised another dollar, to $5.35 a pack, the   
   state’s smuggling rate would jump to nearly 61% of the market. When you   
   factor in a ban on flavored    
   cigarettes, the smuggling rate rises even higher, to nearly 66%. If the   
   governor gets her way, 2 out of 3 cigarettes smoked in New York state will   
   have been smuggled.   
      
   Other states show what’s in store. Massachusetts effectively imposed a ban   
   on flavored cigarettes in mid-2020. We found that smuggling there leapt nearly   
   7% after the ban took effect. What’s more, sales of flavored cigarettes   
   increased in surrounding    
   states. That means Bay State residents didn’t stop purchasing cigarettes;   
   they bought them in lower-tax jurisdictions like New Hampshire.   
      
   Widespread and growing tax avoidance leads to less tax revenue, a key reason   
   Ms. Hochul wants to raise taxes. New York lost more revenue in 2020 than any   
   other state except California, thanks to its high taxes on cigarettes. Without   
   smuggling, the Empire    
   State would rake in almost $1.1 billion more a year in cigarette-tax revenues.   
   We estimate that a $1 tax increase would translate into a revenue decline of   
   $46 million. A tax increase coupled with a ban on flavored cigarettes would   
   mean a decline of $167    
   million.   
      
   Our study isn’t the first to find that New York state and New York City are   
   awash in smuggled smokes. Numerous studies over the past decade, including one   
   funded by the U.S. Food and Drug Administration, showed significant   
   cigarette-tax avoidance and    
   evasion, especially in the city. Research also shows that raising taxes again   
   will likely do little to dissuade people from smoking. The people who still   
   buy cigarettes are dedicated smokers: Their preference for smoking overcomes   
   the deterrent power of    
   any levy. If these people are told to pay even more, they have a greater   
   reason to buy smuggled cigarettes.   
      
   Finally, and most concerningly, the rise in smuggled cigarettes will lead to   
   more crime. Differences in cigarette-tax rates have inspired murder-for-hire   
   plots, robberies and other violence and property crimes. Ms. Hochul should ask   
   if higher taxes are    
   really worth an increase in crime.   
      
   New York can’t keep tobacco, drugs and other contraband out of its prisons   
   and jails. How does it expect to stop smugglers from finding ways to bring   
   untaxed cigarettes into the state? It’s hard to see a scenario in which Ms.   
   Hochul’s proposal    
   would achieve its ends or have a positive impact. The negative consequences   
   are easy to predict—they’re happening now. New York should be looking for   
   ways to end cigarette smuggling. One great way to start is by not increasing   
   taxes even more.   
      
   Mr. Nesbit is assistant professor of economics at Ball State University. Mr.   
   LaFaive is senior director of fiscal policy at the Mackinac Center for Public   
   Policy.   
      
   https://www.wsj.com/articles/taxes-have-made-new-york-into-an-em   
   ire-of-cigarette-smuggling-avoidance-evasion-flavor-revenue-hochul-f2b11e15   
      
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