Monday, February 9, 2015

NY | 3/5 Cigs Are Smuggled

In 15 states, more than 1 in 5 cigarettes are smuggled. 
In NY State, it's 3 in 5.
The sale of smuggled cigarettes is on the rise nationwide, according to the latest report from the Tax Foundation, an NGO that promotes lower taxes.

The thrust of the report is that state and local governments that increase taxes on tobacco products have created lucrative incentives for black market cigarette trafficking between states. 

As a result, the sale of smuggled cigarettes is on the rise nationwide.

Cigarette taxes are Pigou taxes, which have benefits. They discourage behavior that is bad for public health or reduces the productivity of workers. They raise revenue to offset the higher spending on health care by federal and state governments created by cigarette smoking by paying for remedies for the behavior and for preventive programs. However:
  • A Pigou tax doesn't work as it should if it is not collected. It neither discourages the costly behavior nor does it pay for solutions.
  • To be specific, New York's Governor Cuomo and Speaker Heastie could help New York State could pay for a lot of things in the budget - or reduce other taxes - if they strengthened programs to collect the lost cigarette tax revenue, which in 2015 may be in the $3 billion range.
The report uses data on smuggling from the Mackinac Center for Public Policy.
  • New York State has the highest rate of inbound cigarette smuggling, 58.0 percent.
  • The states that are the next most dependent on contraband cigarettes are: Arizona (49.3 percent), Washington (46.4 percent), New Mexico (46.1 percent), and Rhode Island (32.0 percent)
  • On the outbound side, the state with the most outbound smuggling is New Hampshire - 28.6 cigarettes are smuggled out for every 100 sold.
  • The states with the next-highest outbound smuggling rates are Idaho (24.2 percent), Virginia (22.6 percent), Delaware (22.6 percent), and Wyoming (21.0 percent).

Michael Phillips, who is kind enough to watch what I say on this blog and to tell me when he thinks I have it wrong, queries in the comments below whether taxes and regulations against smoking are working. He argues that they are not and evil side effects such as the black market in cigarettes (Eric Garner was selling single untaxed cigarettes) are being ignored.

Michael doesn't provide sources. However, my information is that 45 percent of American adults used to smoke and the Centers for Disease Control reports that, as of 2013, the figure recently broke through the 20 percent floor for all American adults:

Overall, about 18 of every 100 American adults (17.8%) smokes - a reduction of 27 percentage points - pretty significant. The proportion of people who smoke varies for different groups:
  • A shade more than 20 of every 100 adult men (20.5%)
  • About 15 of every 100 adult women (15.3%)
  • Nearly 19 of every 100 adults aged 18–24 years (18.7%)
  • About 20 of every 100 adults aged 25–44 years (20.1%)
  • Nearly 20 of every 100 adults aged 45–64 years (19.9%)
  • Nearly 9 of every 100 adults aged 65 years and older (8.8%)
(In the report, current smokers are defined as persons who reported smoking at least 100 cigarettes during their lifetime and who, at the time they participated in a survey about this topic, reported smoking every day or some days.)

The New York Times has just editorialized that smoking is even worse for us than we thought. There are still 42 million Americans who smoke. We should be doing more to reduce smoking, not less.