ENDS Taxes

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This page will examine some of the issues of taxing vapor and other forms of safer nicotine. Because smoking has been around much longer, we'll also look at some of the issues surrounding taxation of traditional tobacco products to provide clues of what might happen as taxes increase on tobacco harm reduction products.


Studies

2021: Intended and Unintended Effects of E-cigarette Taxes on Youth Tobacco Use

  • Currently, Congress is considering doubling the cigarette excise tax (to $2.01 per pack) and setting the ENDS tax to parity with the new cigarette tax (Durbin 2021). This tax, if adopted, would imply a roughly $2.01 tax per 0.7 fluid mL of nicotine, assuming a Juul pod is equivalent to a pack of cigarettes (Truth Initiative 2019), or $2.87 per fluid mL. Our MTF results suggest that this would reduce youth current ENDS use by 5.5 pp but raise current cigarette use by 3.7 pp, assuming that the cigarette tax portion of the bill has no effect as suggested by the small, statistically insignificant cigarette tax effects estimated in this paper, and other recent studies (Hansen, Sabia, and Rees 2017). The YRBSS results meanwhile suggest much larger reductions in youth current ENDS use, but a sizable increase in youth current cigarette use of 2.3 pp. If ENDS are substantially safer products as suggested by several major government-commissioned reviews (McNeill et al. 2018; National Academies of Sciences, Engineering, and Medicine 2018; UK Committee on Toxicity of Chemicals in Food, Consumer Products and the Environment 2020), our results suggest that the proposed bill may harm youth health in the United States
  • PDF Version
  • Citation: Intended and Unintended Effects of E-cigarette Taxes on Youth Tobacco Use, Rahi Abouk, Charles J. Courtemanche, Dhaval M. Dave, Bo Feng, Abigail S. Friedman, Johanna Catherine Maclean, Michael F. Pesko, Joseph J. Sabia, and Samuel Safford, NBER Working Paper No. 29216, September 2021, JEL No. H2,I1,I18
  • Acknowledgement: Research reported in this publication was supported by the National Institute on Drug Abuse of the National Institutes of Health under award number R01DA045016 (PI: Michael Pesko), R01DA039968 (PI: Dhaval Dave), and an Evidence for Action grant from the Robert Wood Johnson Foundation (grant #74869; PI: Friedman). Dr. Sabia acknowledges support from San Diego State University’s Center for Health Economics & Policy Studies (CHEPS), Dr. Courtemanche acknowledges support from the University of Kentucky’s Institute for the Study of Free Enterprise, and Dr. Abouk acknowledges support from William Paterson University’s Cannabis Research Institute. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.


2021: Estimating the Impact of Tobacco Parity and Harm Reduction Tax Proposals Using the Experimental Tobacco Marketplace

  • These findings support tobacco taxation as a robust tool for suppressing purchasing and suggest that differential taxation in proportion to product risk would be an effective way to incentivize smokers to switch from smoked to unsmoked products.
  • Citation: Freitas-Lemos, R.; Keith, D.R.; Tegge, A.N.; Stein, J.S.; Cummings, K.M.; Bickel, W.K. Estimating the Impact of Tobacco Parity and Harm Reduction Tax Proposals Using the Experimental Tobacco Marketplace. Int. J. Environ. Res. Public Health 2021, 18, 7835. doi:10.3390/ijerph18157835
  • Acknowledgement: This study was supported by the Fralin Biomedical Research Institute at Virginia Tech Carilion and the National Institutes of Health, National Cancer Institute grant (5P01CA200512).


2021 (Revision): The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

  • Cigarettes continue to kill nearly 480,000 Americans each year, and several reviews support the conclusion that e-cigarettes contain fewer toxicants and are safer for non-pregnant adults than cigarettes. Our results suggest that e-cigarettes are elastic goods and their use substantially reduces cigarette sales.
  • Despite potentially detrimental unintended consequences of e-cigarette taxes, between the end of our study period (December 2017) and December 2020, 20 additional states enacted e-cigarette taxes, bringing the total to 28.
  • We find robust evidence that e-cigarette taxes are over-shifted to consumers. Our results here suggest that state-level e-cigarette taxes are passed through to prices at a higher level than e-cigarette taxes enacted at the sub-state level.
  • Here, a 1% increase in cigarette taxes reduces cigarette sales while a 1% increase in e-cigarette taxes increases cigarette sales.
  • In late February 2020, the U.S. House of Representatives approved a national e-cigarette tax proportional to the federal cigarette tax (House Bill 2339 2020). The bill specifies a tax rate of $50.33 per 1,810 milligrams of nicotine (or $0.028 per milligram). JUUL pods at the time of writing contain 59 milligrams/ml (at 5% nicotine volume). Assuming this conversion, we simulate that, if this bill were to become law, the tax could raise e-cigarette prices by $2.36 per ml ($0.0278 x 59 x 1.44 using Table 3), would reduce NRSD e-cigarette purchases by 1,784 ml per 100,000 adults , and would increase NRSD cigarette pack purchases by 26,736 packs per 100,000 adults. Our rate of substitution would be halved when compensating for the NRSD capturing roughly twice the share of cigarette sales than e-cigarette sales, which brings us to a substitution rate of one pod = 7.5 packs.
  • A limitation of our study is the reliance on e-cigarettes sold through retail stores, so we cannot capture e-cigarettes sold through specialty vape shops and online. However, e-cigarette taxes are collected for both online and vape shop purchases in the same way they are collected in retail stores, so we are unaware of any financial incentive to change shopping venue in response to an e-cigarette tax.


2020: The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

  • We simulate that for every one standard e-cigarette pod (a device that contains liquid nicotine in e-cigarettes) of 0.7 ml no longer purchased as a result of an e-cigarette tax, the same tax increases traditional cigarettes purchased by 6.2 extra packs.
  • PDF Version
  • Citation: Cotti, C., Courtemanche, C., Maclean, J. C., Nesson, E., Pesko, M., & Tefft, N. (2020). The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data. doi:10.3386/w26724
  • Acknowledgement: Research reported in this publication was supported by the National Institute on Drug Abuse of the National Institutes of Health under Award Number R01DA045016 (PI: Michael Pesko).


2020: The ethics of tobacco harm reduction: An analysis of e-cigarette availability from the perspectives of utilitarianism, bioethics, and public health ethics

  • Much evidence suggests e-cigarettes are substantially less harmful than combustible cigarettes. E-Cigarette Availability (ECA) involves making e-cigarettes available to allow smokers to switch to them, and informing smokers of the lower risks of e-cigarettes vis-à-vis smoking.
  • First, ECA is supported by a public health ethics framework. ECA is a population-level intervention consistent with respecting individual autonomy by using the least restrictive means to accomplish public health goals, and it supports equity and justice. Second, ECA is supported by four principles that form a biomedical ethics framework. By reducing smokers' health risks and not harming them, ECA fulfills principles of beneficence and non-maleficence. Because ECA allows smokers to make informed health decisions for themselves, it fulfills the principle requiring respect for persons and their autonomy.
  • E-cigarette availability (ECA) can also advance justice by providing a harm reduction alternative for disadvantaged groups that disproportionately bear the devastating consequences of smoking. Policies of differential taxation of cigarettes and e-cigarettes can facilitate adoption of less harmful alternatives by those economically disadvantaged.
  • We conclude that public health and biomedical ethics frameworks are mutually reinforcing and supportive of ECA as a tobacco harm reduction strategy.


2020: Tobacco harm reduction in the 21st century

  • Toxicological testing, population studies, clinical trials and randomized controlled trials demonstrate the potential reductions in exposures for smokers. Many barriers impede the implementation of product substitution in tobacco harm reduction. These products have been subjected to regulatory bans and heavy taxation and are rejected by smokers and society based on misperceptions about nicotine, sensational media headlines and unsubstantiated fears of youth addiction. These barriers will need to be addressed if tobacco harm reduction is to make the maximum impact on the smoking endemic.
  • Increasing taxes on reduced-risk products could function to deter smokers from switching to them.
  • To reduce smoking and to save millions of lives, tobacco harm reduction in the form of cigarette substitution with low-risk products appears to be a promising path. These products, although not completely risk-free, offer an alternative to quit or die. In consideration of the available evidence, advice to tobacco smokers should include trying substitute products. The obvious fact so often overlooked is that smoking is rewarding and people like to do it. Giving smokers an alternative with efficient nicotine delivery means that they might prefer one of these products over cigarettes.


2019: 2019: E-Cigarettes and Adult Smoking: Evidence from Minnesota

  • We provide some of the first evidence on how e-cigarette taxes impact adult smokers, exploiting the large tax increase in Minnesota. That state was the first to impose a tax on e-cigarettes by extending the definition of tobacco products to include e-cigarettes. This tax, which is 95% of the wholesale price, provides a plausibly exogenous deterrent to e-cigarette use.
  • Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level about 1.8 million smokers would be deterred from quitting in a ten year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period.
  • PDF Version
  • Citation: Saffer, Henry and Grossman, Michael and Dench, Daniel and Dave, Dhaval, E-Cigarettes and Adult Smoking: Evidence from Minnesota (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=3503054 or http://dx.doi.org/10.2139/ssrn.3503054
  • Acknowledgement: This project was funded by grant number R01-DA039968 entitled “The Economics of Electronic Nicotine Delivery Systems: Advertising and Outcomes”, from the National Institute of Health to the National Bureau of Economic Research, Inc. This study employs data from the A.C. Nielsen Company, which was purchased from the Kilts Center of the University of the Chicago Booth School of Business.


2019: The Effect of E-Cigarette Taxes on Pre-pregnancy and Prenatal Smoking

  • We show that e-cigarette taxes increase pre-pregnancy smoking, increase prenatal smoking, and lower smoking cessation during pregnancy. These findings imply that e-cigarettes and traditional cigarettes are substitutes among pregnant women.
  • PDF Version
  • Citation: The Effect of E-Cigarette Taxes on Pre-Pregnancy and Prenatal Smoking, and Birth Outcomes - Rahi Abouk, Scott Adams, Bo Feng, Johanna Catherine Maclean, and Michael F. Pesko, NBER Working Paper No. 26126, July 2019, JEL No. I12
  • Acknowledgements: Research reported in this publication was supported by the National Institute on Drug Abuse of the National Institutes of Health under Award Number R01DA045016 (PI: Michael Pesko).


2019: The Effects Of Traditional Cigarette And E-Cigarette Taxes On Adult Tobacco Product Use

  • We find evidence that adults are more likely to use e-cigarettes when traditional cigarette taxes rise.
  • Traditional cigarette taxes appear to be less effective – in terms of reducing smoking – when a locality has also adopted an e-cigarette tax.
  • This finding suggests that the combination of a traditional cigarette tax hike and e-cigarette tax prevents smokers for either quitting or switching to a less harmful product, both actions would improve smoker health by minimizing exposure to carcinogens and other toxins contained in traditional cigarettes.
  • Our research contributes further evidence from differences-in-differences methods that regulating e-cigarettes have the unintended consequence of raising traditional cigarette use; while neither product is harmless, the clinical literature strongly suggests that e-cigarettes are the less harmful product. These results suggest caution in regulating e-cigarettes because they may increase smoking of traditional cigarettes.


2019: The Vapor industry Economic Impact Study

  • The vapor industry is a dynamic part of the U.S. economy, accounting for about $24.46 billion in output or about 0.14 percent of GDP. It employs approximately 166,007 Americans who earned wages and benefits of about $7.90 billion.
  • Members of the industry and their employees paid $3.31 billion in federal, state and local taxes. This does not include state and local sales taxes or excise taxes that may apply for specific retail purchases which are estimated to total $1.67 billion.
  • Original link to the study


2004: Poor Smokers, Poor Quitters, and Cigarette Tax Regressivity

  • The fact that the poor smoke more than the rich means that they either will be paying more in taxes or will be “forced” to cut back more. Higher cigarette taxes cause hardship among some poor individuals who find it difficult to quit. In the drive for better public health, we should acknowledge the price paid. Standard principles for assessing the equity of taxes should not be forgotten.

Resources

Policy Analysis

Tobacco & Vaping 101: United States

  • 50 state and Washington DC analysis of smoking, vaping, taxes, MSA funds, and prevention / cessesation funding.


2021: The Taxation of Nicotine in Canada: A Harm-Reduction Approach to the Profusion of New Products

  • A critical feature of tobacco use is that morbidity and mortality spring primarily from the combustion process associated with traditional cigarettes. Nicotine, a chemical found in tobacco, is addictive and may not be safe in extreme doses but it, by itself, is not the source of harm from tobacco/smoking. As a result, policymakers must take this into account when considering tax rates for nicotine/tobacco-based products. The harm-reduction approach taken in this Commentary recognizes that cigarettes kill and that if alternative nicotine systems are known with certainty to contain a small fraction of the toxins in cigarettes, this is sufficient to attempt to divert users away from the killer products toward the lower-risk ones, even with uncertainty surrounding the lifecycle health impacts of the latter.
  • Several identifiable social groups experience high rates of tobacco use: individuals with poor mental health, First Nations and Indigenous Communities (FNICs), the homeless and individuals who identify as LGBTQ+. For many in these communities, tobacco is both a comfort and a burden: nicotine provides the comfort while the toxins debilitate the body and the mind. The objective of reducing smoking must become more keenly focused upon who is still smoking and why. If nicotine alone provides minimal health damage and at the same time provides satisfaction to users, then the “war on tobacco” needs to separate out combustion-related tobacco toxins from nicotine. These high nicotine-use social groups also have lower average incomes than the population at large and, therefore, should not be denied access to less-expensive nicotine by limiting access to lowerpriced ANDS (Alternative Nicotine Delivery Systems).


Slide Presentation

Economics of E-Cigarettes: Background, Theory, and Evidence

  • Nice presentation that gives a lot of historical information on vapor technology, links to several studies, and a broad view of policy implications


Tax Information

Low-Income & Smoking: 50 State Analysis

  • Covers smoking and vaping. Clickable map for state by state analysis


USA table of vapor taxes by state

  • Stats on vape taxes in the USA


USA Maps of Vapor and Tobacco Taxes

  • Page contains several maps of taxes on several kinds of tobacco and vapor products.



Articles / OP-Eds

2021: To Increase Smoking Rates Among Young Adults, Keep Hiking Vape Taxes

  • Data from the Centers for Disease Control and Prevention’s (CDC) youth surveys indicate that vaping rates among high school students increased between 2017-2019, after vape taxes were imposed in several jurisdictions.
  • Of eight states that had e-cigarette taxes prior to 2019, seven saw an increase in proportions of young adult smokers after their state e-cigarette tax went into effect.
    • California had a 34 percent increase in people aged 18-24 who smoked after the passage of an e-cigarette tax. Deleware's increase was 48.6 percent. Pennsylvania passed a 40% wholesale tax on vapor products, which closed 1/3 of the vape shops in that state and increased smoking in the 18-24 year old age group by 19 percent. Kansas, Louisiana, Minnesota and West Virginia also say increases in smoking in young adults after passing taxes on vapor products.
  • Peer-reviewed studies have found that high taxation rates on e-cigarettes increase smoking and/or prevent adult smokers from transitioning to less harmful alternatives.


2020: Native American Reservations a Haven for New York Vape Shops

  • New York State’s 20 percent excise tax on vapor products and nearly 9 percent sales tax also do not apply to the Shinnecock and other tribes. Essentially, Silva said, patrons can spend almost 30 percent less than they normally spend, and nobody has to worry about breaking the law.


2020: New Study Suggests Raising Taxes On E-Cigarettes Could Encourage Traditional Smoking

  • Using data from 35,000 national retailers from 2011 to 2017, researchers found that for every 10% increase in e-cigarette prices, e-cigarette sales dropped 26%. But the same 10% increase in e-cigarette prices caused traditional cigarette sales to jump by 11%.


2019: Vaping Taxes Should Be Carefully Designed

  • With all good intentions to reduce the underage use of a product designed for adults, the question remains: Is increasing excise taxes to punitive levels the best way to achieve this honorable target? Punitive excise levels not only impact minors but also limit the availability of vapor products to adults, who are trying to quit smoking.
  • It is a principle of good taxation policy that taxes remain as neutral as possible. That means taxes should neither encourage nor discourage personal or business decisions. Legislators should pass regulations rather than adopt taxes to achieve regulatory goals. Furthermore, they should make sure that current regulations are enforced.


2018: Are Sin Taxes Healthy for State Budgets?

  • Taxes on vices are tempting but unreliable source of revenue.
  • This is the paradox of sin taxes, the class of taxes that includes tobacco. These extra dollars and cents levied on products and activities considered detrimental to consumers—traditionally tobacco, alcohol, and gambling—are intended to accomplish two contradictory goals: Like all taxes, they generate revenue for the taxing entity, but they also aim to deter the behavior being taxed—which can ultimately negate the first goal.
  • Research by The Pew Charitable Trusts and the Nelson A. Rockefeller Institute of Government found that overall, tobacco tax revenue declined in over half the states.
  • In recent years, states have increasingly viewed sin taxes as budget fixes.
  • Tobacco taxes also tend to affect particular segments of the population more. Although just 14 percent of those at or above the poverty line smoke, roughly 1 in 4 adults living below the poverty line does.
  • With the growing appeal of e-cigarettes and legalized recreational marijuana, lawmakers are looking to both as a source of revenue to ease long-term budget challenges. Although both products offer fresh sources of funds, lawmakers would benefit from taking a cautious approach to them. Uncertainties, including long-term consumption trends and shifts in the black market, make returns difficult to forecast. As with tobacco, alcohol, and gambling taxes, new levies on marijuana and e-cigarettes may provide short-term revenue gains. Their ability to be sustainable long-term revenue sources capable of funding ongoing expenditures, however, is unclear.
  • State regulations have already had significant effects on suppliers. In Pennsylvania, for example, more than 100 shops have closed since a tax—40 percent of wholesale value—went into effect in October 2016. Wide disparities in state tax rates probably incentivize smuggling and tax evasion; high tax rates could fuel a black market.


2016:Cigarette Taxes: Issues and Options

  • Since 2002, nearly every state has enacted a cigarette tax in-crease to fund health care, discourage smoking, or to help balance state budgets.
  • Cigarette taxes are regressive: that is, low- and middle-income taxpayers pay more of their income in these taxes, on average, than do upper-income families.
  • If a state is relying on the revenue from the tax to fund programs or supplement a state budget, however, it is important to note that the revenues raised by cigarette taxes are unlikely to be sustainable in the long-run, and that their impact will fall disproportionately on lower-income individuals.


Videos

2019: CBS News: E-cigarette tax could deter smokers from quitting, study says

  • Economists say that imposing a federal tax on vaping could discourage millions of smokers from kicking the habit.


Blogs

2019: Are vapers like you paying for lost tobacco revenue?

  • By James Dunworth
  • Could billions of dollars in tobacco taxes be one of the factors behind the attack on a disruptive industry?


Several Posts ABout Taxes on THR101

  • Several posts on vaping and taxes


Unintended Consequences of Taxes and Bans - Law Enforcement

2014: Eric Garner dies in NYPD chokehold

  • Accused of selling "loosies"


Taxpayer Dollars

2018: Fear Profiteers

  • For most non-profits, private donations are their only means of funding. But, by making the case that they provide a public service, some health advocacy groups have succeeded in securing a steady supply of taxpayer funds."
  • Anti-tobacco advocates have also convinced state governments to hand millions of dollars over to them. For example, in 1988 Californians voted on Proposition 99, a ballot measure to triple the state’s tax on cigarettes and extract a $1.4 billion windfall from smokers over three years. Of that money, 25 percent was earmarked for tobacco control research and health education programs. Because the anti-smoking groups in California expected to receive some of that $350 million, the measure triggered a lobbying bonanza, with groups like the American Cancer Society, American Heart Association, and American Lung Association throwing their considerableweight and cash behind Prop 99"... (More on this on page 21 [22/100])
    • "The ACS (American Cancer Society) invested more than $200,000 in cash, loans, and staff to convince Californians to vote for Prop 99. It was the largest policy advocacy project ACS had undertaken up to that point. Prop 99 won. In its 1990 annual report, the ACS California division claimed the tax “will help us fund health care services and education” and that “wheels are in motion to ensure that the funds are allocated and managed wisely."
    • "After the cigarette tax was approved, the health advocacy groups took to squabbling over how much money each organization should get from the revenue it would generate. In a news conference, the American Cancer Society, American Heart Association, and American Lung Association accused the California Medical Association (CMA) of “playing into the hands of tobacco interests by pushing lawmakers to shift $100 million from the antismoking program to health care programs for the poor.” What riled the health groups was a letter sent by the CMA to legislators, in which it noted that “antismoking crusaders are not always motivated by public interest or high ideals,” and that they were “fighting for this money like jackals over a carcass.”
  • "Public health advocates also gain access to public funds by working as subcontractors for local health departments. For example, a 1993 CDC grant to the Florida Department of Health and Rehabilitative Services, part of its “Initiatives to Mobilize for the Prevention and Control of Tobacco Use” program, noted that the funds would be used to deploy a “Tobacco Free Florida Coalition.” The purpose of this effort, among other things, was to provide advocacy for tobacco control legislation, like increased taxes, indoorsmoking bans, and restrictions on advertising and sales of tobacco. The funds created the role of Coalition Coordinator, a position “located at the American Cancer Society (ACS) in Tampa, Florida.” Of the 10 paid personnel listed for the Tobacco Free Florida, half came from either the American Heart Association, American Lung Association, or American Cancer Society. Unsurprisingly, in 2018, when the Florida legislature considered a proposal to divert some funds from the Tobacco Free Florida program to cancer research, these groups mobilized to lobby against that proposal."
  • Since 1996, RWJF has given more than $22 million to Americans for Nonsmokers’ Rights and its educational arm, American Nonsmokers’ Rights Foundation. In addition to RWJF, American Nonsmokers’Rights received nearly $5 million between 1995 and 1999 from the California Department of Health Services raised from California’s Prop 99 cigarette tax increase—to compile what several media outlets, including The Los Angeles Times, described as an “enemies list.” This involved monitoring and distributing information about people who spoke out against tobacco control policies at city council meetings, and even investigating a judge who had ruled unfavorably in a secondhand smoking case."
  • The "growing market for alternative tobacco products created new competitors for traditional tobacco companies and manufacturers of pharmaceutical nicotine. Declining cigarette sales, and declining cigarette tax revenues, also threaten to tighten the spigot of money flowing to anti-tobacco activists.

2018: The Unintended Consequences of Cigarette Taxation

  • Cigarette taxes are regressive. Poor New Yorkers spend close to a quarter of their income (23.6%) on tobacco.
  • Only about half of the families that qualify are enrolled in SNAP, but when cigarette taxes go up, people sign up in droves, so much so that, after a tax hike, an eligible but unenrolled household is almost 10 times as likely to sign up for food stamps than to have a member quit smoking. (SNAP, formerly known as the Food Stamp program, is a federal benefit program that helps low-income households buy food.)


Unintended Consequences - From Black Markets to Deals With Big Tobacco

2021: Article: Emails show negotiations involving Colorado governor, cigarette giant that led to tobacco tax hike

  • The emails obtained by The Sun about the 2020 legislation, including one labeled as a “draft term sheet” and marked “highly confidential,” show Altria was negotiating the measure with Polis and health groups.
  • While Proposition EE raises taxes on most tobacco and nicotine products in Colorado, it actually slashes them for so-called modified-risk tobacco products. Altria sees those products, which are part its IQOS system, as its future. Vaping shops objected to the MRTP discount, saying they lack the resources to seek an MRTP designation for their merchandise from federal regulators and that Altria would be given another market advantage.


2021: Article: Black market cigarettes a growing boom trade in Western Australia, warns ex-top border cop

  • The founder of Border Force's illegal tobacco squad says one in five cigarettes smoked in Australia is illegal and demand has spawned a smuggling trade worth hundreds of millions of dollars each year, with a recent record-breaking case in Western Australia.
  • the black market for illegal tobacco – imported mainly from Asia and the Middle East – has grown, with the ATO estimating about $650 million in potential tobacco excise revenue was lost in 2017-18.


2021: Article: Man receives $100k fine after AGLC seized nearly 6,700 pounds of contraband tobacco

  • The potential lost tax revenue of the products was estimated by Alberta Gaming, Liquor and Cannabis (AGLC) to be more than $972,000.


2017: Article: Second Illinois man charged with using fake business to buy and sell $3M in tax-exempt cigarettes

  • Most of the cigarettes Khatib bought were allegedly sold in Chicago, where the state excise tax is $1.98 per pack compared to 17 cents per pack in Missouri. Khatib and Qaddoumi allegedly kept the inflated profits.


2017: Article: Women allegedly bought up cigarettes in low-tax Missouri to sell in high-tax New York

  • The women admitted they had driven around the St. Louis area in a rented car buying them up [160 cartons of cigarettes], with plans to sell them back in New York. In addition to the recovered cigarette cartons, police found about two dozen fake credit cards that the women apparently used to buy them.


2015: Report: Understanding the U.S. Illicit Tobacco Market

  • Tobacco use has declined because of measures such as high taxes on tobacco products and bans on advertising, but worldwide there are still more than one billion people who regularly use tobacco, including many who purchase products illicitly. By contrast to many other commodities, taxes comprise a substantial portion of the retail price of cigarettes in the United States and most other nations. Large tax differentials between jurisdictions increase incentives for participation in existing illicit tobacco markets. In the United States, the illicit tobacco market consists mostly of bootlegging from low-tax states to high-tax states and is less affected by large-scale smuggling or illegal production as in other countries.
  • This report estimates the portion of the total U.S. tobacco market represented by illicit sales has grown in recent years and is now between 8.5 percent and 21 percent. This represents between 1.24 to 2.91 billion packs of cigarettes annually and between $2.95 billion and $6.92 billion in lost gross state and local tax revenues.
  • PDF version
  • Citation: National Research Council. 2015. Understanding the U.S. Illicit Tobacco Market: Characteristics, Policy Context, and Lessons from International Experiences. Washington, DC: The National Academies Press. https://doi.org/10.17226/19016.


2013: Article: Cigarette smuggling makes WA tax revenue go up in smoke

  • Washington’s Department of Revenue estimates the state lost about $376 million in tax revenue in 2012 to cigarette tax evasion. An estimated 35 percent of the cigarettes in Washington are contraband.


See Also:

Nicotine - Black, Gray, & Alternative Markets

  • Taxes and bans often raise the concern over the creation of black markets


Nicotine - Banning Flavors - Opposition

  • Tax increases often have some of the same reasons for opposition, including the increase in a black market, safety of illecit products, tax evasion, and more law enforcement involvement due to black markets.


ENDS Adults Who Smoke

Suggested Information to Add to This Page

2021: Article: Taxing Tobacco and E-Cigarettes at Same Rate Will Harm Young Users, New Study Finds

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