Analysis: High Cigarette Taxes Contribute To Increased Smuggling Rates In Michigan
MIDLAND (WWJ) – While many think high cigarette taxes prevent Michigan residents from smoking as much, a new government analysis suggests the higher taxes are actually contributing to increased rates of cigarette smuggling in the state.
The Mackinac Center for Public Policy recently released its latest estimates for cigarette smuggling rates in 47 of the 48 contiguous states, including Michigan, which saw its overall rate increase 12.7 percent — from just over 26 percent to almost 30 percent.
Michigan has the tenth highest smuggling rate in the nation, with an estimated 29.3 percent of all cigarettes consumed in the Great Lake State being smuggled in.
Michael LaFaive, director of the Mackinac Center’s Morey Fiscal Policy Initiative, said the smuggling involves “individuals [who] cross borders for personal smokes and an organized, criminal class [that] brings in contraband cigarettes by the van full.”
This is the third set of smuggling rate estimates published by Mackinac Center analysts. The first two studies were published in 2008 and 2010, and contained detailed histories of smuggling in Michigan and other states.
As cigarette excise tax rates have increased around the country, so too has rampant smuggling, according to the report. The top smuggling rates in the nation, according to the study, include New York (60.9 percent); Arizona (54.4 percent); New Mexico (53 percent); Washington State (48.5 percent); and Rhode Island (39.8 percent).
“Cigarette smuggling is far from new but the degree to which illegal smokes are crossing from lower tax jurisdictions to higher ones is,” Todd Nesbit, co-author of the Center’s analyses, said in a statement.
Smuggling is not the only unintended consequence of imposing higher cigarette taxes — the high rates have also been linked to increased violence against people, police and property.
“With high taxes on cigarettes, states are creating a ‘prohibition by price,’ and with all of the same consequences of real prohibition,” LaFaive said.
To see a chart detailing smuggling rates and ranks for all 47 states, click here.