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‘Cigarette Smuggling’ Cited by Tax Group [AUDIO]

Higher cigarette taxes are partly meant to discourage smoking, but they could be contributing to a different, and sometimes criminal, problem.

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“Cigarette smuggling” has become an unintended consequence, according to Tax Foundation, a non-partisan tax research organization based in Washington, D.C.

“Large differentials in cigarette taxes across states create incentives for black market sales,” the foundation’s latest report stated.

“Black and gray” markets have been formed by people who obtain cigarettes in low-tax states and move them into high-tax states.

The activity can range from organized crime operations to regular smokers who travel over state lines for a cheaper price per carton.

The report suggested that smuggled cigarettes made up 15.5 percent of all cigarette consumption in New Jersey two years ago, ranking 18th among the states.

New York topped the list with a 56.9 percent smuggle consumption rate, most likely due to its $4.35 tax per pack, compared to New Jersey’s tax of $2.70.

Scott Drenkard, an economist with Tax Foundation, noted the trend is leading to less money coming in for many states.

“All the excise tax revenue that you would’ve otherwise gotten is either being absorbed by another state or is not being collected at all,” Drenkard said. “People like to think of raising cigarette excise taxes as a win-win. However, that’s not always true.”

Cigarette tax rates increased in 30 states and the District of Columbia between 2006 and 2012, according to the report. New Jersey’s rate jumped by 13 percent during that period.

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