MIDLAND, Mich. — More than 40% of Michigan’s cigarettes may be smuggled in from other states if a bill to raise cigarette excise taxes and ban flavored nicotine products is enacted, the Mackinac Center for Public Policy finds in newly updated research. Currently 17.1% of all cigarettes consumed in Michigan are smuggled into the state, according to data from 2022, the most recent year available.

The Mackinac Center, in partnership with the D.C.-based Tax Foundation, has updated its estimates of the percentage of total cigarette consumption that can be attributed to tax evasion and avoidance across the continental United States.

New York, where 54.3% of all cigarettes came from elsewhere, remains America’s number one smuggling state. California had the second highest smuggling rate at 46.7%, followed by New Mexico (41.2%), Massachusetts (39.7%) and Washington state (36.8%). All five of these states retained their spots from last year and continue to have some of the highest excise taxes in the country.

“It is not at all surprising that the states with the highest cigarette taxes are often the very ones with the highest smuggling rates,” said Todd Nesbit, economics professor at Ball State University and member of the Mackinac Center’s Board of Scholars.

High excise taxes and bans on certain products play a significant role in which states see the most smuggling. To avoid paying more or to get products that are no longer legally available, people will purchase cigarettes that are brought in from neighboring states and sometimes from other countries. Even more troubling, cartels known for distributing drugs like fentanyl or methamphetamine are beginning to expand into the cigarette business.

“There are a host of unintended consequences that come alongside product prohibitions and higher taxes on products deemed to be ‘sinful,’” said Adam Hoffer, director of excise tax policy at the Tax Foundation. “Often these policy barriers don’t keep people from getting the products they want. Instead, they incentivize normal citizens and organized crime to break the law.”

Michigan’s smuggling rate has declined over the years, but it could soon see itself making the list of the five states with the highest smuggling rates. Bills introduced last fall would increase taxes and prohibit flavored cigarettes. If these become law, the state could see more problems than just smuggled products.

“Higher taxes and outright Prohibition of flavored products would turn Michigan into a top destination for illicit smokes,” said Michael LaFaive, senior director of fiscal policy at the Mackinac Center. “Consumers pay more taxes; smugglers get more profits and law enforcement gets more work. The Great Lake State has enough problems. We shouldn’t add more to the list.”

View the updated estimates here. View a related essay, “Proposed Tax Hike and Flavor Ban a Recipe for Lawlessness,” here.