Report: As cigarette tax rises, so does smuggling -- Gazette.Net


Cigarette smuggling has increased dramatically in Maryland over the past five years, along with cigarette tax rates, according to a study released last week by the Mackinac Center for Public Policy, a conservative Michigan-based think tank.

In the study, Maryland jumped 11 spots to the No. 13 state in the nation for consumption of smuggled cigarettes. The study estimates that about 25 percent of cigarettes consumed in Maryland are smuggled, up from about 10 percent in 2006 but down slightly from the high of 26.4 percent in 2009.

The study used data from 2011 and compared taxes and smuggling rates with data from 2006.

The study finds that in most cases where cigarette taxes have been raised since 2006, the state has seen an increase in smuggling. New York, which tops the list, has increased the state cigarette tax by 190 percent since 2006, and consumption of smuggled cigarettes has nearly doubled, according to the study.

Maryland’s state cigarette tax increased by $1 in 2007 to $2 per pack, and health advocates are hoping for a similar increase this year. A $1 increase, as proposed, would give Maryland the sixth highest rate in the country at $3 per pack, compared with $2.86 in Washington, D.C., $1.60 in Delaware and Pennsylvania, and 30 cents in Virginia.

Comptroller Peter V.R. Franchot (D) has made cracking down on cigarette smuggling a priority; in fiscal 2012, the state confiscated 325,851 packs of cigarettes, worth nearly $2 million. Franchot is proposing legislation this year to increase penalties for those caught with illegal packs and has not endorsed any tax hike on tobacco.

“With or without a tax increase, we need increased enforcement powers,” Franchot said, citing revenue lost to the state and local businesses due to smuggling, as well as the prevalence of underage smokers as consumers of illegal cigarettes, as reasons to crack down.

“Smuggling cigarettes is more lucrative than smuggling heroin, and the penalties are ridiculously low,” Franchot said.

Currently, transportation of contraband cigarettes carries a $50 per carton fine or two years in prison. The new law would triple the fine to $150 for transporting a carton of cigarettes on the first offense, with a $300 per carton fine for each subsequent offense.

“We’re very much in support of increased penalties for smuggling,” said Vincent DeMarco, president of Maryland Citizens’ Health Initiative, the organization lobbying for the cigarette tax increase. “The comptroller’s office does a good job of cracking down on smuggling, and if he says he needs more enforcement powers, we’re in support of that.”