Smuggled cigs continue to flow into Bay State
Out-of-state cigarettes continue to flood the market in Massachusetts, according to the latest statistics.
Nearly 22% of cigarettes consumed in Massachusetts in 2018 were smuggled into the state, down 3 points from a year earlier but up from the 17.5% smuggled in 2006, according to a new report.
Massachusetts now ranks 12th in the nation in the percentage of smuggled cigarettes, according to the Tax Foundation, a nonpartisan tax policy think tank.
The average cost of a pack of cigarettes in the state is about $9, including $3.51 in state tax since 2013, $1.01 in federal taxes and about 50 cents in sales tax, said Ulrik Boesen, senior policy analyst for the foundation.
Compare that to an average of $5.81 per pack in New Hampshire, which has a state tax of $1.78, which is the source of many of the cigarettes smuggled into Massachusetts, Boesen said.
“Obviously, when you increase the tax, demand does decline,” he said. “But if all you do is discourage purchasing in the state, that doesn’t discourage people from smoking; it just encourages them to buy their cigarettes elsewhere.”
Rhode Island, for example, has seen a sharp increase in smuggling following a cigarette tax increase from $3.75 to $4.25 in 2017, moving the Ocean State from a ranking of 18th-to eighth-highest inflow of cigarettes in the U.S., the report said.
Much of the smuggling is for “casual smoking” by people who just want to spend less in their home state, Boesen said. But in low-tax states such as Virginia and North Carolina, as well as China and parts of Eastern Europe, “you have highly organized criminal activity,” he said.
China makes an estimated 400 billion counterfeit cigarettes per year for international smuggling, Boesen said.
“It’s highly certain that counterfeit cigarettes from China and Eastern Europe find their way into the Massachusetts market,” he said. “This is really big business. It’ll be sold out of vans or online, not in stores.”
“I want lawmakers to understand there’s a risk you’re going to accelerate this kind of activity if your taxes are too high,” Boesen added. “It only encourages smuggling and the illicit market, which produces counterfeit cigarettes. And you have no way of knowing what’s in them.”
Smuggling is a particular problem for convenience stores, said Jonathan Shaer, executive director of the New England Convenience Store and Energy Marketers Association.
“It robs the state and retailers of revenue when you have a product coming into the state illegally and sold illegally,” Shaer said. “That’s how many of these cigarettes end up in the hands of kids. There’s no one checking IDs on the illegal market.”
The problem has only been exacerbated by Massachusetts’ ban this year on all flavored cigarettes, which traditionally have been popular in communities of color, he said.