Maryland Gov. Wes Moore recently signed a budget agreement that would raise taxes on cigarettes and other tobacco and vaping products. The cigarette tax will increase by $1.25, to $5.00 per pack.

Lawmakers should rethink their plan. We estimate that nearly one-third of all cigarettes consumed in Maryland in 2022 came to market through tax avoidance and evasion, or what we call smuggling. Raising the excise tax further will exacerbate a widely acknowledged problem and could bring other unintended consequences.

Since 2008, we have maintained a statistical model that compares smoking rates by state with paid sales of cigarettes. The difference between what gets smoked and the number of cigarettes being legally bought must be explained, and we conclude that it is due to smuggling. Other scholars have found the same.

Currently, Maryland has the eighth-highest inbound smuggling rate in the United States. We calculate that a $5.00 per pack cigarette tax will push the state’s smuggling rate to nearly 49% of state consumption. The Old Line State’s smuggling rank among states will also increase six spots to second- highest, behind New York.

We also estimate that the vast majority of the smuggling will be from “casual” smugglers, or consumers looking to save a buck by crossing into a nearby state. Virginia’s state tax is only 60 cents, so it is not hard to see where Maryland consumers might get the majority of their lower-priced smokes.

While cigarette excise taxes are often sold as a way to improve public health, published reports indicate that this tax hike is just a revenue grab. Lawmakers and others are likely to be disappointed by both the health outcomes and the amount of new revenue they receive. Our model demonstrates that the 33% tax increase will raise only 1.3% more in cigarette tax revenues, or $5.7 million. That tiny increase in revenue is a direct function of the higher excise tax and related smuggling.

We are hardly the only scholars to find that cigarette smuggling is a significant problem. We have cited dozens of academic, business consultancy and industry studies in past works that likewise show illicit trafficking to be rampant in some parts of the country.

One 2008 study published in the National Tax Journal said that nearly 36% of Maryland consumers engage in smuggling. This was during a period when the tax rate was just $1.00 per pack. The cigarette tax rate gulf between Maryland and neighboring states like Virginia has only widened since, offering greater incentives for consumers to smuggle.

A study of California released this year suggested that even an outright ban on flavored cigarettes (36% of the market by one measure) and other products did little to stem acquisition of them.

Smuggling is not the only unintended consequence of high cigarette excise taxes. Retail theft, corruption of public officials and violence have also been found in states with high cigarette taxes. Last December a Maryland corrections officer pled guilty to helping inmates smuggle contraband, including smokes, into the state prison in Hagerstown. If Maryland can’t keep illicit cigarettes out of a prison, how will its police keep them out of the state’s residents?

Maryland police even lent a hand to the smuggling trade in 2012. Prince George’s County police officers were busted for providing protection for the distribution of untaxed cigarettes. The Washington Post reported that one of the officers drove his police vehicle — in full uniform and with his service weapon — to a location where he helped unload cigarettes. As the satirist Dave Barry has said, “I’m not making this up.”

All of this is not to suggest that the authors want more people to smoke more cigarettes. Far from it. Neither of us smoke, and we don’t want you to either. Our point in presenting our findings is to demonstrate that this attempt at a revenue grab may fall short of the goal — as a direct result of the revenue grab itself.

Higher cigarette taxes will promote more smuggling and raise law enforcement costs while yielding little bang for the extra buck, or buck-twenty-five.

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