A new study released by The Tax Foundation this week reports high tax rates on cigarettes induce smuggling of tobacco products from low-tax states or foreign sources into high-tax states.
“States and municipalities have spent millions to combat cigarette smuggling. Recent policy responses include greater law enforcement activity on interstate roads, differential tax rates near low-tax jurisdictions, banning common carrier delivery of cigarettes, and cracking down on tribal reservations that sell tax-free cigarettes,” the “Cigarette Taxes and Cigarette Smuggling by State, 2020” report said. “However, the underlying problem persists. High cigarette taxes act similarly to a ‘price prohibition’ on the legal product in many U.S. states, incentivizing smuggling and illicit activity.”Read More