A recent study by analysts for the Tax Foundation and the Mackinac Center for Public Policy has shown that New York’s anti-smoking tax policies are costing the state and city billions in lost tax revenue.
The study found that more than 50% of the cigarettes consumed in New York are smuggled in - the nation’s highest rate. In 2015, the most recent reporting year, the state lost US$1.63 billion because of untaxed sales.
Currently, a pack of Marlboro costs US$13.00 in Manhattan, of which US$4.35 is a state tax levy and US$1.50 is a city tax. In 2015 the city lost an estimated US$740 million and the state about US$895 million on top of that.
“Given the relationship between higher cigarette tax rates and higher smuggling, policymakers should consider these issues when determining whether a cigarette tax increase is appropriate,” said Scott Drenkard, director of state projects for the Tax Foundation.
The foundation said the campaign by many states to generate more revenue, and at the same time deter smoking, has backfired into a morass of smuggling and black market activity.
Also, a study by the Mackinac Center discovered that besides the tax losses, the smuggling activity has uncovered evidence of violence against residents and police officers; financing of a terrorist organization; cigarette truck hijackings; counterfeiting of tax stamps; property damage; and the counterfeiting of name-brand cigarettes that are replaced with inferior products.