California has low cigarette taxes, high smuggling, study says

By Dan Walters, Sacramento Bee
02/09/2015 1:12 PM

California has the nation’s second-lowest rate of smoking and one of its lower rates of taxing cigarettes, but also has one of its highest rates of cigarette smuggling, a new nationwide study contends.

The study implies that California’s proximity to Mexico, where cigarette prices are about one-third lower, makes it a major destination for smuggled smokes.

The new data provide fuel for what may be a new debate over raising California cigarette taxes, currently 87 cents a pack, the 18th-lowest such tax in the nation. Anti-smoking groups are considering a cigarette tax measure for the 2016 ballot.

The Tax Foundation and Michigan’s Mackinac Center for Public Policy issued the annual report on cigarette smuggling, saying that generally, the highest rates are found in states with the highest cigarette taxes and therefore highest consumer costs.

New York, where a pack of cigarettes can cost over $15, thanks to the nation’s highest state cigarette tax and an additional levy by the City of New York, has the nation’s highest incidence of smuggling with an estimated 58 percent of cigarette demand being met by smuggled smokes, the study found.

California has the 6th-highest rate of smuggling, the study found, at 31.5 percent despite its much-lower tax, with nearly all of the state’s traffic coming from either Canada or Mexico, presumably the latter. All other states with high smuggling rates have taxes that are much higher than California’s.

Although Nevada is believed to be a net exporter of smuggled smokes, its tax, 80 cents a pack, is scarcely lower than California’s. Thus its outflow of cigarettes is likely to be mostly in the luggage of visitors from high-tax states, particularly those on the East Coast.

California’s rate of smoking, which a recent Gallup Poll pegs at 15 percent of adults, is lower than any other state except Utah.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, Follow him on Twitter @WaltersBee.


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