Michigan a Leader in Cigarette Smuggling Due to High Tax Rate
A new report shows a direct connection between high cigarette taxes and high rates of cigarette smuggling. Michigan's cigarette taxes and rate of cigarette smuggling are both among the highest in the nation.
New York has the highest rate of cigarette smuggling in the country. It is estimated that 56 percent of all cigarettes consumed in New York are smuggled in from somewhere else. New York's cigarette tax of $4.35 per pack is tied for the highest in the nation.
Michigan's tax rate is $2.00 per pack of cigarettes. It is estimated that 21 percent of all cigarettes consumed in Michigan are smuggled in from somewhere else. That is the 14th highest rate in the nation.
In one year, Michigan smuggled in over 114 million packs of cigarettes which ranks as the fifth most in the country.
A high-tax state's proximity to lower-tax states plays a major role in the rate of cigarette smuggling. Michigan's closest low-tax state is Indiana which has a tax rate of 99.5 cents per pack and a smuggling export rate of 19 percent. It is estimated that 65 million packs of cigarettes were smuggled out of Indiana in one year.
The study was done using data from 2017.