Business & Tech
    Next Score View the next score

    After Mass. raised its cigarette tax, smuggling exploded, study finds

    Packs of cigarettes for sale at a convenience store in Somerville.
    Brian Snyder/REUTERS/File
    Packs of cigarettes for sale at a convenience store in Somerville.

    A new study has concluded that nearly 30 percent of all the cigarettes smoked in Massachusetts in 2014 were smuggled into the state, a drastic increase that apparently followed a tax hike on cigarettes.

    Researchers at the Mackinac Center for Public Policy, a Michigan think tank, found that cigarettes illegally brought into Massachusetts jumped to 29.3 percent of all those smoked in 2014, up from 12 percent in 2013, the seventh-highest rate among states and largest year-over-year increase of any state. They hypothesized that the spike in black market sales resulted from an increase in the state’s tax on cigarettes from $2.51 per pack to $3.51 per pack in 2013.

    State law makes it illegal to transport or sell cigarettes in Massachusetts that do not bear a state tax stamp. Mackinac researchers say “smuggled” cigarettes include those bought in other states with lower tax rates by individual smokers, as well as bulk sales by organized black market rings.

    Advertisement

    Massachusetts State Police officials have said they focus enforcement on commercial smuggling rings, not individual consumers who may cross the border for a carton for their own use.

    Get Talking Points in your inbox:
    An afternoon recap of the day’s most important business news, delivered weekdays.
    Thank you for signing up! Sign up for more newsletters here

    A public policy institute, Mackinac Center conducts an annual study of cigarette smuggling and tax avoidance within states that tax tobacco. Its researchers compared each state’s smoking rate to official numbers tracking legal, taxed cigarette sales, along with other data. The study was released this week in conjunction with the Tax Foundation, a non-partisan tax research group in Washington, D.C.

    Public health advocates, however, argue that higher taxes on tobacco discourage smoking. Complaining that high taxes only lead to smuggling “is a long-used tactic of the tobacco industry to try to prevent tobacco tax increases, which have proven to be one of the most effective ways to help people quit smoking and prevent kids from starting,” said Marc Hymovitz, a spokesman for the American Cancer Society Cancer Action Network in Framingham.

    A spokesman for the Tax Foundation acknowledged the group receives donations from the tobacco industry, but said the smuggling study was not directly funded by cigarette companies and rejected suggestions it was intended to advance their interests. He also noted the Mackinac Center had been producing the annual report before the Tax Foundation’s involvement.

    In Massachusetts, the proportion of adults who smoked regularly fell from 16.4 percent in 2012 to 14 percent in 2015, according to the Centers for Disease Control and Prevention . It’s not clear whether the 2013 tax hike contributed to that decline.

    Advertisement

    New Hampshire, which imposes a per-pack tax of $1.78, is likely the source of many illicit cigarettes consumed in Massachusetts, the Mackinac Center study said. Researchers calculated that for every 100 cigarettes consumed in New Hampshire, an additional 81 were smuggled out, making it the top cigarette-exporting state.

    New York — where a pack of cigarettes is taxed at a nation-leading $4.35, plus an extra $1.50 in New York City — remains the highest net importer of smuggled cigarettes, according to Mackinac.

    The findings released this week echo earlier studies. A state panel on illegal tobacco said in 2013 that tobacco tax avoidance and smuggling schemes cost Massachusetts between $74 and $295 million of tax revenue annually.

    In 2011, the state added a counterfeit-resistant stamp to cigarette packaging that made it easier for law enforcement to identify illegally-purchased cartons. Lawmakers have also banned cash sales from cigarette suppliers to retailers and mandated electronic record-keeping of transactions, while the Department of Revenue has also suggested higher penalties for selling cigarettes without a license.

    Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.