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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and local
levels. We are a 501(c)(3) nonprofit
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Cigarette Taxes and Cigarette Smuggling
by State, 2017
• Excessive tax rates on cigarettes approach de facto prohibition in some
states, inducing black and gray market movement of tobacco products into
high-tax states from low-tax states or foreign sources.
• New York has the highest inbound smuggling activity, with an estimated 55.4
percent of cigarettes consumed in the state deriving from smuggled sources
in 2017. New York is followed by California (44.6 percent of consumption
smuggled), Washington (42.8 percent), New Mexico (40.8 percent), and
Minnesota (34.6 percent).
• New Hampshire has the highest level of outbound smuggling at 65 percent of
consumption, likely due to its relatively low tax rates and proximity to high-
tax states in the northeastern United States. Following New Hampshire is
Delaware (40.6 percent outbound smuggling), Idaho (26.8 percent), Virginia
(24.2 percent), and Wyoming (22.4 percent).
• Pennsylvania, following a cigarette tax increase from $1.60 to $2.60 in early
2016, has seen a significant increase in smuggling into the state.
• Cigarette tax rates increased in 37 states and the District of Columbia
between 2006 and 2017.
• Lawmakers interested in taxing and regulating electronic cigarettes should
understand the policy trade-offs related to high taxation or bans of nicotine
products. With distribution networks already well-developed, criminal gangs
are poised to expand into vapor products.
Senior Policy Analyst
TAX FOUNDATION | 2
Tobacco Tax Differe