Sin Tax Wars! 60.9% of all smokes in NY go untaxed

With all the nonsense that’s been going on in the Empire State of late – especially the Governor’s successful gun rantings – I’d begun to worry that New York was doomed for mediocrity. But for better or worse, you just can’t keep the government of this state down. If we can’t lead in freedom, prosperity or employment, we can at least be the capital of piracy. (Cigarette smuggling piracy, that is.)

The Midland, Mich.-based Mackinac Center has released smuggling reports in 2006 and 2009, in addition to its most recent report covering 2011. In 2006, the Mackinac Center estimated that New York had the fifth highest smuggling rate in the country as 35.81%. In 2008, New York’s state excise tax on cigarettes nearly doubled, going from $1.50 to $2.75 per pack. In the Mackinac Center’s 2009 report, New York rose to number two on the list, with a smuggling rate of 47.35%. State excise taxes rose again in 2010, going from $2.75 to the state’s current $4.35. Not surprisingly, the 190% increase in state excise taxes from 2006 through 2011 catapulted New York to its title as the most smuggled state.

But this still leaves a pressing question. Where are all of these smokes coming from? It’s not as if Al Gore’s global warming has suddenly turned New York into a great place to grow tobacco. According to another analysis, the largest (illegal) exporter of cigarettes to the Big Apple was New Hampshire. How could that happen?

New Hampshire had the highest share of its cigarettes — 26.8 percent — smuggled out of the state. The state cut its tax rate in 2011 by 10 cents to $1.68, still slightly higher than the national average. But it is surrounded by states with much higher tax rates. In Massachusetts, for example, the tax was $2.51 per pack.

If it was easier to get large quantities of cigarettes from a place like Tennessee to New York, that’s where they would be coming from. (You can find Marlboros there for under five bucks a pack today, all taxes included.) But New Hampshire is closer, so their retailers reap the benefits. Meanwhile, Governor Cuomo’s state continues to bleed out cash, thinking that just one more tax hike will finally make the difference and put us back in the black.

Let us know how that works out, Andy.