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The Tax Foundation compared 2022 census data and cigarette sales
figures to try to determine the percentage of out-of-state
cigarettes being consumed.
Illinois, which adds nearly $3 in taxes on a pack of 20, is
ranked 10th in the nation for cigarette smuggling. The study
shows that over a quarter of the cigarettes consumed in Illinois
are smuggled.
“For Illinois, our data tells us there are a lot more cigarettes
being consumed in the state than the tax sales data would
suggest,” said Adam Hoffer, director of Excise Tax Policy.
Hoffer added that the primary driver of the amount of cigarette
smuggling is the relative magnitude of a state’s excise tax.
The state that gains the most from cross-border cigarette
shoppers is Indiana, with a net revenue gain of more than $68
million a year. Chicago’s cigarette tax is over $7 a pack, the
highest of any city in the country.
Hoffer said cigarette smuggling costs state governments billions
of dollars a year.
“I think taxes are one of the biggest causes that drive smokers
to other areas to buy cigarettes,” said Hoffer. “Illinois has a
higher tax than most of the surrounding areas.”
Previous Tax Foundation research showed that Illinois loses
nearly $300 million a year in tax revenue to illegal cigarette
sales.
The study notes that a smuggler who legally purchases cigarettes
in a low-tax area, such as Missouri, and then sells the
cigarettes in a high-tax area like Illinois, still pays taxes
and buys American-made goods. The tax gain for Missouri is less
than the tax loss for Illinois.
The study found that New York is the state with the largest
cigarette smuggling problem, with 54% of consumption smuggled.
At $5.35 for a pack of 20, New York State’s cigarette tax is the
highest in the nation. |
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