Blair Horner: NY Takes Step Toward Reducing Cigarette Smuggling

Jul 1, 2013

Higher prices have been shown to encourage smokers to quit or reduce their consumption of cigarettes.  Cigarette tax evasion makes cigarettes cheaper and reduces the public health benefits of New York’s excise tax, as well as depriving the state of much-needed revenue.  Were the tax collected on all cigarettes smoked in New York, tens of thousands of adults would quit rather than pay higher prices, and state revenues would dramatically increase.

Tobacco causes the overwhelming majority of lung cancers in New York State, and accounts for approximately one in four cancer deaths.  A recent analysis estimated that smoking causes 9,610 cancer deaths in one year, which is by far the single biggest cause of cancer deaths. 

The best way to avoid cancers caused by smoking is to never start.

Yet virtually all smokers start using tobacco products prior to the age of 18, the legal minimum age for the purchasing of tobacco purchasing age.  Despite the fact that it is illegal to sell tobacco to those under the age of 18, in New York, 12.6 percent of high school and 5 percent of eighth grade students are current tobacco users.

New York’s cigarette shipment law is one essential component in the State’s quest in reducing youth access to tobacco.  Since it was enacted over a decade ago, along with the clean indoor air law and higher taxes on cigarettes, smoking rates among adults and youth are lower than the national average, at a rate faster than the national average.

Thus, if public health policy is to effectively reduce the smoking rate, the devastation resulting from smoking-related diseases, and ensure that minimum purchase age requirements are effective, additional policies must be enacted to curb children’s attraction to tobacco products.

Over the past decade, almost every state has raised cigarette taxes, sometimes multiple times. The health benefits are undeniable, but the benefits to states’ revenues are not as clear-cut.

In 2010, states with high tobacco taxes lost about $5 billion in revenue because of cigarette smuggling, according to the Bureau of Alcohol Tobacco Firearms and Explosives.  Experts say the number is climbing.

Most of the black market in cigarettes is between low-tax states and high-tax states: Smugglers purchase cigarettes in a low-tax state and transport them to a high-tax state.  Then they sell them at a discount to smokers while still pocketing a healthy profit.  Because there is such a wide disparity among states’ cigarette taxes, the price differential is well worth the risk of smuggling, according to law enforcement officials.  New York State boasts of the highest state tax in the nation – $4.35 per pack.  On top of the state tax, New York City levies its own tax of $1.50 per pack—making the city an attractive destination for smugglers.

Smugglers usually drive down the eastern seaboard to Virginia, which has the second lowest tax in the country at 30 cents a pack, and pay $15 to $20 a carton.  They load up a U-Haul and return to New York City where cartons normally sell for $120 each.

The smugglers sell them there for $60 to $70 a carton — half price to the smokers and without the tax collected.  If they take apart the cartons and sell the contraband by the pack, the profit is even greater in a city where a pack goes for about $12.  As a result, New York State loses hundreds of million dollars in tax revenue and cheap cigarettes are more easily available to minors.

This past legislative session saw a reform passed that strengthens enforcement of the law prohibiting the illegal shipment of cigarettes in three ways:

·         It boosts penalties.  The legislation requires a civil penalty of $5,000 or $100 per pack, whichever is higher;

·         It broadens enforcement.  The bill allows the Attorney General and the New York City Corporation Counsel to enforce its civil penalties; and

·         It closes a potential loophole in current law, which will make it easier for government agents to engage in “sting” operations to identify businesses willing to sell cigarettes to minors. 

While the legislation is only one step in curtailing illegal sales of cigarettes, it is a step in the right direction.  Here’s hoping that Governor Cuomo agrees and approves this legislation when it arrives on his desk.

Blair Horner is the Vice President for Advocacy for the American Cancer Society, Eastern Division.  His commentary does not necessarily reflect the views of the American Cancer Society.

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