High cigarette taxes turn smokers into smugglers — dailyfinance

Getty Images The conclusion from a recently released report on cigarette taxes and cigarette smuggling from the Tax Foundation may sound obvious. The Washington, D.C. based think tank found that when states impose high excise taxes on cigarettes, smokers tend to avoid buying cigarettes there. Instead, they buy them in low tax states smuggling their smoky contraband across state lines.

No shocker there, right? However, what may surprise you is the foundation’s revelation of the size of the phenomenon.

The States That Bum the Most Out of State Smokes

At $4.35 a pack, New York levies the highest excise tax on cigarettes in the land. It has nearly tripled the size of its excise since 2006 and now boasts an excise tax almost precisely three times the national average ($1.46 a pack).

The result the majority of cigarettes smoked in New York are contraband. According to the study’s data (which goes through 2012, the most recent year for which complete data are available), 56.9 percent of New York’s cigarettes were smuggled into the state, dodging New York excise taxes.

A majority of smokes are smuggled in Arizona as well (51.5 percent), and New Mexico and Washington state (which tax smokes at $1.66 and $3.025 a pack, respectively) are not far behind. And they may not be alone.

The study shows that smuggled smokes make up 25 percent or more of cigarettes consumed in 12 states. And with the foundation reporting that 30 states, plus the District of Columbia, increased cigarette taxes between 2006 and 2012, the trend is moving toward higher cigarette taxes and more cigarette smuggling into states doing more of the taxing.

Smuggled From Where?

So where are all these contraband smokes coming from? In the United States, roughly 15 billion packs of cigarettes are sold each year. Some come from international globetrotters arriving in state via duty free. As for the rest, the six biggest supplier states for cigarettes (the places where smugglers buy their contraband smokes before taking them back home) appear to be

  • New Hampshire 24.2 percent
  • Wyoming 22.3 percent
  • Idaho 21.3 percent
  • Virginia 21.1 percent
  • Delaware 20.9 percent
  • West Virginia 20.6 percent

In these six states, at least 1 in 5 cigarettes sold in the state isn’t consumed there so these places are where the cigarettes are coming from. (Note that Altria’s (MO) headquarters lie in Virginia. North Carolina, which is home to twin tobacco heavyweights Lorillard (LO) and Reynolds American (RAI), may also be a prime source for smokes but the foundation didn’t provide full data on the state in its study, so it’s hard to say for sure. Other jurisdictions with incomplete data are Alaska, Hawaii and the District of Columbia.)

Curiously, while cigarette excise taxes are pretty low in four of these six states, in two of them Delaware and New Hampshire the respective per pack excise taxes of $1.60 and $1.78 are a bit higher than the national average of $1.46.

The attraction of smuggling cigarettes bought in these states can be explained by geography. Delaware is surrounded by tax crazy states Maryland, Pennsylvania and New Jersey. New Hampshire abuts even higher above average taxers Vermont, Maine and Massachusetts.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

  • The Aloha State legislature, in an effort to preserve the uniqueness of their island paradise, has an «Exceptional Tree» tax allowance. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. That’s per tree. Top bracket earners taxed at the state’s highest rate (11 percent) would save $330 via the deduction.

    The work must be done by a certified arborist, and the deduction can be claimed only every third year. The deduction was enacted in 2004. Hawaii has had a list of «Exceptional Trees» since 1975, and there are now estimated to be more than a thousand thus designated. Hawaii That’s a Nice Tax Deduction You’ve Got Growing There

  • Maine legislators, a flinty bunch, don’t see the harm in taxing anyone who deals in their official state fruit blueberries, at the rate of 1.5 cents per pound. The resulting revenues more than $1.6 million to state coffers in the fiscal year that ended in June 2013 are used to promote the crop and agricultural research.

    The state also taxes harvesters and processors of hard shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower. The taxes are levied at the wholesale level, but naturally, they end up being passed on to the consumer. Maine A Treasured (and Taxed) Fruit

  • The Yellow Hammer State is the last in the union to tax a deck of cards as if it were a «vice,» like alcohol and tobacco.

    Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.

    But in Alabama, you’ll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards. Alabama Ante Up for Playing Cards

  • «Merlyners» love their pollution beleaguered Chesapeake Bay, the largest marine estuary in the U.S. In 2013, in part to meet federal pollution control mandates, Free State legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Bay.

    Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so called «Rain Tax.»

    One way localities can calculate the tax is by measuring how much of a landowner’s tract is «impervious» to precipitation seeping into the ground. So the more you’ve developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That’s how the tax is being implemented (through aerial and satellite photos) in Montgomery County, Md., a heavily developed suburb of Washington, D.C., and landowners are up in arms.

    Other counties have rebelled, opting to pay for the pollution control programs out of general funds rather than pass the cost onto landowners. Maryland s Republican candidate for governor, David Craig, has made the law’s repeal part of his platform for the 2014 election. Maryland Who’ll Tax the Rain?

  • The Sunflower State is among a bevy of jurisdictions that allows sale of lower alcohol beer (the term of art is «cereal malt beverage») in convenience and grocery stores.

    But Kansas also taxes «3.2» beer differently and there lies the rub. At a liquor store, all products, including, say, a conventional six pack of Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8 percent alcohol tax. In Pomona, Kans., for example, the effective rate on the weaker beer would be 9.7 percent. Go figure. Kansas Weaker Beer, Higher Tax?

  • When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that’s why Kansas’s beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose.

    Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50 per
    cent alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon. California Paying for Proof

  • Entertainment venues pay a business tax to the Silver State ranging from 5 to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there s live entertainment going on.

    There are exemptions, however, including this one, for businesses that provide » … Instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen.»

    So your piano player can play «Feelings» softly and even crack a few jokes, tax free, for your business. Just make sure they’re not funny enough to attract attention. Nevada The Softer the Music, the Lower the Taxes

  • Want to own a plush or fuel thirsty ride? That ll cost you extra in the Garden State.

    Cars that cost $45,000 or more or have a combined EPA fuel mileage average of 19 or below pay an additional 0.4 percent on top of New Jersey s 7 percent sales tax. New Jersey $100K Mercedes $400 More Tax

  • Businesses in D.C. that sell food or alcohol are required to charge customers 5 cents for every paper or plastic disposable bag they take. The store gets to keep a penny, and the balance goes to a government fund dedicated to cleaning up the Anacostia River.

    Consumers and storekeepers grumbled at the program’s debut in 2010. It has raised about $7 million so far, below expectations, but the program s designers see this as a positive sign that shoppers have opted to bring their own reusable bags. District of Columbia We’ll Tax That Shopping Bag

  • In the Land of Enchantment, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday You don’t have to pay state income tax anymore.

    If you’ve been physically present in the state for at least six months and a resident of the state on the last day of the year, and you re not someone’s dependent, you’re eligible. You’ll still need to file, and there are some complications if you’re married and your spouse doesn’t qualify. New Mexico It Pays to Be a Centenarian

    • 14 IRS Audit Red Flags
    • QUIZ Is It Deductible?
    • 10 States with the Scariest Death Taxes

    EMAIL Tell Us About a Weird Tax in Your State

    More on Taxes from Kiplinger

Drugs and e-cigarettes: criminalise, legalise, regulate? here’s what lib dem members think…

By Stephen Tall Mon 28th April 2014 2 00 pm
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Lib Dem Voice has polled our members only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. More than 830 party members responded thank you and we re publishing the full results.

Two thirds of Lib Dems back legalisation of ‘soft’ drugs&#8230

With regard to «soft» drugs such as cannabis, which of these statements comes closest to your own view?

    9% The sale and possession of such drugs should remain a criminal offence as now

    22% The sale and possession of such drugs should remain illegal but should be regarded as a minor offence, rather than a criminal offence (a policy sometimes called decriminalisation )

    64% The sale and possession of such drugs should no longer be illegal, and could be taxed/regulated (sometimes called ‘legalisation’)

    2% Other

    2% Don’t know

There’s remarkably little support for the status quo among according to our survey of Lib Dem members not even 1 in 10 want sale and possession to remain a criminal offence. Some 22% favour the half way house of decriminalisation, but an overwhelming 64% want to see full legalisation. Here’s a sample of your comments&#8230

Soft drugs lead to hard drugs
But ‘Possession with intent to supply’ should still apply to those cultivating or manufacturing large amounts of such drugs. The maximum penalty is currently 14 years.
The government could raise taxes from this
Legalisation should happen only if provision remains regulated under medical supervision.
All drug use, legal and illegal, should be regarded as a health issue and doctors permitted to prescribe and/or administer to addicts using a controlled commercial source and in safe circumstances. The sale and distribution of drugs, including cannabis, outside of this area, should remain prohibited. In time, nicotine should be added to the list of restricted substances.
If it is legal, we can provide better heath advice.
Drug prohibition has failed and is a huge waste of public money. A new strategy is needed based on education
Legalise, standardise and tax
The production, supply and distribution of all drugs , without exception, must be brought under effective legal control immediately. Anything less than this reform is a waste of time.
Prohibition of «drugs» has been shown to be inefficient for policing, health and financial reasons. A well regulated «drug» regime that provides those wanting to take drugs safely the ability to do so will provide the country with better outcomes in many areas.
War on drugs is really just a way of criminalising large parts of the population. In the US, it looks racist.
Regulation and taxation, then we can treat it as a public health issues rather than a criminal issue.
Possession should be decriminalised, but not the sale
Like tobacco it is harmful to health but taking it is a personal decision.
Possession should be legal, but sale should be heavily regulated and punished where regulations are not followed.
Cannabis should be completely legalised
It should only happen in coordination with the rest of Europe.

&#8230 But split on ‘hard’ drugs 45% support status quo, 45% support reform

With regard to «hard» drugs such as heroin and crack cocaine, which of these statements comes closest to your own view?

    45% The sale and possession of such drugs should remain a criminal offence as now

    20% The sale and possession of such drugs should remain illegal but should be regarded as a minor offence, rather than a criminal offence (a policy sometimes called decriminalisation )

    25% The sale and possession of such drugs should no longer be illegal, and could be taxed/regulated (sometimes called ‘legalisation’)

    6% Other

    3% Don’t know

When it comes to ‘hard’ drugs, however, Lib Dems are divided. A plurality in our survey favour the status quo of continuing criminalisation (45%). But an equal proportion opts for reform, with 25% wanting full legalisation and 20% opting for the half way house of decriminalisation. Here’s a sample of your comments&#8230

Sale should remain a serious offence. Possession should not.
Prohibition simply doesn’t work.
The categorisation of some drugs as «hard» cam be highly misleading. More people die each year from abuse of paracetamol than from heroin.
Government interventions should be based on public health considerations
These drugs are a very different kettle of fish to soft drugs and serious harm can result from their use
The Swiss example is one we could look at. Have Heroin etc available on prescription.
I think there’s a difference between possession and possession with intent to supply.
Making hard drugs offences «minor» is the worst of all worlds, as it would make it easier for criminal organisations to make money from drugs trafficking. Better to legalise with regulation.
Make all drugs subject to prescription so doctors are in charge of them. They could then be prescribed to addicts but kept away from children and not abused for recreational purposes.
legalise them all.
Get the drugs off the street.
supply cleaner drugs and help those on hard drugs.
The least harmful are LSD, Psilocybin and MDMA. Are these (because they are class A) «hard drugs»? If so, they should be legalised at least at the same time as cannabis which scores much higher on the harm scale developed by David Nutt. Heroin and crack cocaine are really symptoms of prohibition. Legalise all and see the market for the least safe versions of such drugs disappear.
The war on drugs has been a dismal failure. I remember the old system when if you were a Registered drug addict, you could get a prescription of medically clean heroin. Most registered addicts worked, and there were only about 2000 in the whole UK. There was very little crime, and almost nobody died (partly because the drugs were not massively adulterated). I think it may have been Einstein who said that keeping on doing the same think when it clearly didn’t work was a sign of madness.
Should be more options for treatments and amnesty’s in certain circumstances.
I would not want these drugs to be easily available, but for those who are addicted they should be available and the state should monitor who is using them to help them end their addiction.
The current system makes the problem worse. We should revert to the system where drugs could be prescribed to registered addicts
We had an effective means of dealing with drug addiction until 1968 with drugs available to users from pharmacies. We should go back to a system similar to that perhaps with special places to use them.
Give people the information and let them make their own choice (again) &#8230

Majority say e cigarettes should be regulated as medicinal smoking cessation patches or gum

Electronic cigarettes contain a nicotine based liquid that is vaporised and inhaled by the user, providing a flavour and physical sensation similar to smoking a cigarette. They do not contain tobacco, which means there is no tar it is the tar in ordinary cigarettes that kills. Some say that e cigarettes will lead to a reduction in people smoking tobacco cigarettes. Others say they are a gateway to smoking tobacco cigarettes. Which of the following statements do you agree with most regarding e cigarettes?

    54% They should be regulated in the same way as medicinal smoking cessation patches or gum

    20% They should be regulated in the same way as products such as food

    14% They should be treated the same as standard tobacco cigarettes

    < strong>1% They should be banned entirely

    3% Other

    9% Don’t know

An interesting response here over half (54%) of Lib Dems supported the regulation of e cigarettes as medicinal smoking cessation patches or gum. This was the option Lib Dem MEPs successfully defeated in the European parliament on the grounds it would would have increased e cigarettes’ cost and reduced their availability in many countries. Their accepted amendment saw e cigarettes treated in the same as standard tobacco cigarettes, an option favoured by just 14% of party members here. Here’s a sample of your comments&#8230

As a smoker, I’d say getting rid of them is crazy we need to think about getting people off cigarettes, and a smoking substitute like this has far more appeal than patches or gum. Having said that, nicotine even without tar isn’t as vanilla as chocolate or whatever, so the food classification strikes me as odd.
Tax the electronic cigarette if purchased on the high street , if prescribed for addicts to recover from addiction do not tax.
They shouldn’t be advertised the advertising of a addictive substances should be banned entirely. Otherwise, restricting access to adults seems entirely sufficient.
They should be banned entirely it will not be long before some smart alec developes a method of vaporising most, if not all, hard drugs to be «smoked» and inhaled with these contraptions. Even the Dutch are contemplating outlawing the process because of this risk.
I suspect the answers to this question will make me consider whether I am in the right party when they are published. Far too many of my fellow Lib Dems are fond of bansturbation&#8230 /
Restricted to chemist shops, or e cigarette shops.
Why on earth should anyone be complaining about e cigarettes? If they stop people from real smoking then they should be supported.
Thanks to electronic cigarettes I have not touched a real cigarette for more than eight months. I would estimate that over half the smokers at work now smoke electronic cigarettes. I feel far healthier and don’t get out of breath easily like I used to. They are very new, however, and until there is any evidence of harm they should be easily accessible.
Restricting e cigarettes threatens what could be the greatest public health advance for years. Tobacco kills so anything that helps people off it must be good.
My wife uses one sometimes, and I hope that it may help her to reduce her use of cigarettes. It slightly reduces my exposure to passive smoking. If they were available on prescription then there would be another opportunity for the medical advice to be repeated.
I support the regulation of these products to ensure they are of a safe standard and are not available to minors but I am totally opposed to the use being banned in public places as there is no issue with breathing in second hand smoke, dangerous to health unlike real cigarettes
We do not have longitudinal studies of the impact of e cigs, and while the risk is unknown, let’s not kill people. We made that mistake with normal cigarettes.
There is plenty of evidence that cigarettes are dangerous to people who aren’t smoking them, which it is right for them to be regulated. There is no such evidence for these, so let people get on with their lives.
I stopped smoking virtually overnight with these. They are far less harmful than cigarettes. It would be madness to ban then whilst still allowing incendiary cigarettes.
I’m happy with the compromise agreed upon by the European parliament. They are not the same as food, and should not be regulated as such, but it is far from proven that the risk of encouraging smoking comes close to outweighing the advantages to people trying to give up.
We have no idea what drugs these preparations contain, nor what their long term effects are. They should therefore either be treated as drugs or food products and their safety evaluated and monitored.
The passing of the ‘smoke filled room’ has been accepted socially. It would be hard for organizations to stop the near equivalent from returning and for the occasional real cigarette to be spotted. They do make ‘smoking’ acceptable again.
Why on earth would a more expensive product that is only now becoming as available as cigarettes be a gateway to cigarettes?
There needs to be regulation of the content and strength of e cigarettes. Nicotine is a very addictive drug (some say more addictive than herione) so, though having fewer side effects such as cancer (as far as we know so far), they are not to be encouraged. If tobacco had been discovered today, it would have been treated as a hard drug and rightly banned. Too late, unfortunately.
All substances should be sensibly regulated with an eye to ensuring the individual is fully aware of risks.

  • 1,500 Lib Dem paid up party members are registered with 745 responded in full and a further 87 in part to the latest survey, which was conducted between 16th and 22nd April.
  • Please note we make no claims that the survey is fully representative of the Lib Dem membership as a whole. However, s surveys are the largest independent samples of the views of Lib Dem members across the country, and have in the past offered accurate guides to what party members think.
  • For further information on the reliability/credibility of our surveys, please refer to FAQs Are the Liberal Democrat Voice surveys of party members accurate? and polling expert Anthony Wells’ verdict, On that poll of Lib Dem members.
  • The full archive of our members surveys can be viewed at
  • Stephen Tall is Co Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think tank CentreForum and writes at his own site, The Collected Stephen Tall.

    Read more by Stephen Tall or more about drugs, drugs policy or e cigarettes.
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