Policy Documents

Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review

December 2, 2008

Between January 2007 and 2009, 21 of the 48 contiguous states — including tobacco state North Carolina — raised their cigarette taxes, producing a total of 27tax hikes. In 2010, tobacco state South Carolina and five other states did the same. This study updates the Mackinac Center’s 2008 publication “Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review” to reflect state and federal cigarette tax hikes through fiscal 2009. The original study used data through fiscal 2006.Our new estimates indicate that in 2009, the state of Michigan ranked 10thin the nation* in smuggled cigarettes as a percentage of total in-state cigarette consumption — 26 percent. The five smuggling destination states with the highest cigarette smuggling rates were Arizona (51.8 percent of the state’s total consumption); New York (47.5 percent); Rhode Island (40.5 percent); New Mexico (37.2 percent); and California (36.3 percent).