Cigarette Taxes Encourage Smuggling

A new report from the Mackinac Center (full 99 page report here) estimates the effect of cigarette taxes on smuggling of cigarettes (both “commercial” and “casual” – i.e. driving a few miles to buy cigarettes in a bordering state – types of smuggling) for all 50 states. 

Pennsylvania ranks in the middle of the pack – with about 13% of cigarette sales having been smuggled in in 2006, on net.  This ranks middle of the pack in the 50 state ranking, matching our middle of the road cigarette tax ($1.35/pack, the 18th highest rate in the country).

Interestingly, Pennsylvania has a net gain in casual smuggling, likely due to our borders with New York and New Jersey, which have among the highest cigarette taxes, and each losing over 40% of cigarette sales to smuggling.