In 2023, New York raised its cigarette excise tax by $1.00 to $5.35 per pack. New York City imposes its own tax of $1.50 per pack, and that’s before you include federal and sales taxes, making for the most expensive smokes in the country. That is, cigarettes are expensive in New York for those who pay those taxes. But state officials were warned that such a high rate would drive consumers to the black market, and that’s exactly what happened. According to recent research, more New Yorkers than ever are turning to tax-evading illicit sources for their nicotine needs.

Taxes Into Good Health—or Not

When the New York excise tax was hiked, the Albany Times-Union noted, “it’s the nation’s highest and brings a pack of cigarettes at many retailers to about $12….Health advocates hailed the increase, saying it will lead to fewer smokers and cancer deaths. Anti-tax groups, though, predicted it will increase trafficking in illicit untaxed cigarettes in the state.”

Health advocates like taxing vices on the theory that raising taxes simultaneously generates government revenue while escalating prices for allegedly bad things—like cigarettes—out of reach of many consumers. What they rarely consider is that there are other options, such as buying cigarettes smuggled from jurisdictions with lower levies.

“New York has created a cigarette-smuggling empire, and the worst is yet to come,” Todd Nesbit, an economics professor at Ball State University, and Michael LaFaive, of the Mackinac Center for Public Policy, warned even before the 2023 tax increase. “It’s the unavoidable consequence of the state’s decadeslong history of raising the cigarette tax.”

“If enacted, consumers will go across borders to do their shopping or rely on black-market suppliers,” agreed the Tax Foundation’s Adam Hoffer. “Tax revenues will fall, illicit activities will thrive, and law enforcement spending will need to increase.”

In fact, as Nesbit, LaFaive, and Hoffer emphasized, even before the dollar-per-pack tax hike, more than half of cigarettes sold in the state of New York lacked local tax stamps and were smuggled from elsewhere. Since 2023, illicit dealers appear to have claimed even more market share.

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