Graphics: Cigarette ‘Sin’ Taxes Equals Smuggling US Edition Updated

Nice graphics exhibiting how populist 'sin' taxes fuel smuggling. This is an update from my January 2013 post

From Joseph Henchman and Scott Drenkard of the Tax Foundation:

-Large differentials in cigarette taxes across states create incentives for black market sales.

-Smuggled cigarettes make up substantial portions of cigarette consumption in many states, and greater than 25 percent of consumption in twelve states.

-The highest inbound cigarette smuggling rates are in New York (56.9 percent), Arizona (51.5 percent), New Mexico (48.1 percent), Washington (48 percent), and Wisconsin (34.6 percent).

-The highest outbound smuggling rates are in New Hampshire (24.2 percent), Wyoming (22.3 percent), Idaho (21.3 percent), Virginia (21.1 percent), and Delaware (20.9 percent).

-Cigarette tax rates increased in 30 states and the District of Columbia between 2006 and 2012.

Public policies often have unintended consequences that outweigh their benefits. One consequence of high state cigarette tax rates has been increased smuggling as criminals procure discounted packs from low-tax states to sell in high-tax states. Growing cigarette tax differentials have made cigarette smuggling both a national problem and a lucrative criminal enterprise.

Read the rest here

If it can happen to the US, then this can happen elsewhere. Yet in contrast to the popular wisdom where proliferation of smuggling has been a consequence of delinquent administration or lax enforcement, the crux of the problem is in the taxation.

Dealing with symptoms will hardly serve as a sufficient cure to the disease.