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Cigarette smuggling continues to raise issues as government officials unearth smuggling rings headed to New York. In conjunction with these investigations, numerous studies have emerged to document the extent of the issue. According to the most recent report, it seems that New York has found itself knee-deep in illegal cigarettes.
The Tax Foundation found that 60.9% of all cigarettes consumed in New York are smuggled, and this has earned New York a first place ranking as king of illegal cigarettes – an honor New York could arguably do without. This 170% percent smuggling increase correspondingly rose with the 190% jump in the tax rate since 2006.
“This information is problematic for many reasons,” explains David Schwartz – spokesman of the New York Association of Grocery Stores (NYAGS). “High tobacco excise taxes provide dangerous smuggling organizations with a substantial monetary incentive to bring their product to New York, and this undermines honest local retailers while depriving New York State of taxable revenue.”
In a past case, the ATF seized 32,000 cartons from two smugglers. If sold in New York, the city and state would have lost at least 1.8 million in taxable revenue. This is especially disconcerting because total cigarette market demand, according to a study published by the expert analysts at John Dunham and Associates (JDA), was 738.4 million packs (73.84 million cartons) in 2011. If 60.9 percent of all cigarettes consumed in New York are smuggled, the city and state are losing taxable revenue on roughly 44,968,560 cartons per year.
The question which remains is: how long will New York continue this charade? If fewer people were smoking as a result of the taxes, then the smugglers would not have business, but clearly this is not the case. The black market cigarette business is booming, and New York has placed a target on its own back. The current status quo endangers the livelihood of the thousands of people who work in the cigarette retail business and honestly abide by the laws.
“Enough is enough.” says Mr. Schwartz. “New York has encouraged this illegal market long enough. It is time to lower these exorbitant market interventions and renew the economic vitality of this sector.”
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