Higher cigarette taxes are causing an increase in the smuggling cigarette trade along Interstate 95 in Maryland and Virginia, and all over the east coast of the United States. Maryland and Virginia lawmakers have passed various bills in the last few months making the penalties for smuggling harsher and so these states can crack down on the trafficking of cigarettes and regain lost revenue.
States and the federal government have all raised tobacco taxes and therefore the profit incentive for smugglers increased. There are huge differences in cigarette costs from one state to another. There's a difference in costs for cigarettes from one state to another as high as $4.18 per pack. 57% of cigarettes smoked in the state of New York alone are smuggled by cigarette traffickers. Therefore the entire east coast is cracking down and making the needed changes to prevent the loss of billions of dollars of revenue and increase the fight against the increase of organized crime.
According to the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), there are many types of tobacco trafficking and schemes, actively trying to avoid taxes. The most common is the smuggling of cigarettes between states due to tax differentials between states along the East Coast of the United States. From $7 billion to $10 billion in state and federal tax revenue is lost each year because of tobacco smuggling. These amounts are much higher than the $5 billion it was just a few years ago, according to the ATF.
The per pack tax on Tobacco ranges from .17 cents in Missouri and .30 cents in Virginia to $4.35 in New York, where there is an additional charge state charge of $1.50 per pack. In total, there have been about 113 tax increases on Tobacco in 47 states, the District of Columbia and New York City since 2000.
According to the campaign for Tobacco-Free Kids in the state of Washington, every time there is a 10% increase in the price of cigarettes the overall consumption lowers by as much as 5% and lowers the number of children who smoke by about 7%.
On the other hand, this increase in Tobacco tax leads to a huge profit for smugglers. For example, Tobacco smugglers buying 200 cases of cigarettes in North and South Carolina to sell illegally in New York can clear as much as $500,000 in profits. Buying illegal and untaxed cigarettes, for as low as $6 a pack instead of the legal $12 to $13 per pack, is as easy as walking into any convenience store in Brooklyn, or any part of New York.
In recent months, over 12 recommendations have been made to various crime commissions on the east coast. One of which includes, dedicating more funding for enforcement, as well as increasing penalties for tobacco smuggling. Besides the lost revenue, organized crime is a growing problem, according to the Virginia State Crime Commission. Crimes that include: gangs stealing peoples' identities, to buy cigarettes in large quantities, using fake credit cards. These schemes can be expansive. Maryland was included in an indictment in the state of New York, after it was discovered that a ring of smugglers were flooding New York city and Albany, New York with more than a million cartons of untaxed cigarettes imported from Virginia. The investigation found $55 million in unlawful cigarette sales and more than $80 million in lost state sales-tax revenue.
No matter how one looks at this, it is a crime to smuggle Tobacco from one state to another. Taxes and loss of revenue by states and the federal government are affected.