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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 global
levels. We are a 501(c)(3) nonprofit
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Cigarette Taxes and Cigarette
Smuggling by State, 2018
• Excessive tax rates on cigarettes in some states induce substantial 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 53.2
percent of cigarettes consumed in the state deriving from smuggled sources
in 2018. New York is followed by California (47.7 percent of consumption
smuggled), Washington (40.1 percent), New Mexico (36 percent), and
Minnesota (35.8 percent).
• New Hampshire has the highest level of outbound smuggling at 66.8 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 Idaho (27.4 percent outbound smuggling), Wyoming (23.1 percent), Virginia
(22.8 percent), and North Dakota (20 percent).
• Rhode Island, following a cigarette tax increase from $3.75 to $4.25 in the
Summer of 2017, has seen a significant increase in smuggling into the state,
moving it from a ranking of 18th to 8th highest inflow of cigarettes in the U.S.
• Cigarette tax rates increased in 39 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.