Cigarette Taxes and Smuggling cover

A study of cigarette smuggling performed by Center analysts in 2008 and subsequently updated with data through 2012 continues to influence policymakers.

Last March, New York Gov. Andrew Cuomo created a task force charged with fighting cigarette smuggling in the Empire State. The 13-member group was born on the heels of wide-spread reporting of Mackinac’s newest estimates (released in February) of state-by-state cigarette smuggling rates.

The Center’s study ranked New York as the number one smuggling state in the nation. We estimated that almost 57 percent of all cigarettes consumed were being acquired illegally.

The Washington, D.C.,-based Tax Foundation — a 77 year-old research institute — amplified our findings in publications of its own which helped introduce the Center’s research to a wider audience. Our findings have been reported recently by such institutions as the New York Post, Bloomberg News and Huffington Post.

Mackinac Center scholars are not the only ones studying this issue. A 2012 study published in the journal “Tobacco Control” estimated that in South Bronx, New York, some 57.9 percent of discarded cigarette packs collected by researchers were untaxed. That is, they were smuggled in from elsewhere.

The Mackinac Center’s cigarette smuggling studies were authored by Michael LaFaive and Todd Nesbit. LaFaive is director of the Morey Fiscal Policy Initiative and Todd Nesbit is an associate professor of economics at Ohio State University.

Michigan’s smuggling rate in 2012 exceeded 27 percent of total consumption (legal and illegal).

The authors did not intend to do a national study of cigarette smuggling. Because their statistical model would not function without a lot of changes to measure, they fed into the model data on 47 of the 48 contiguous states. This was done just to get Michigan smuggling estimates, but the result produced a bonus — cigarette smuggling rates for almost every state — and one that has had national implications.

Previous state-by-state estimates have been performed by other scholars, but not on a consistent basis so changes can be tracked over time. By publishing smuggling estimates routinely policymakers cannot only engage the extent of a problem, but it’s shifting patterns.

Perhaps no other scholars in the nation are providing this informational service to policymakers.