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As taxes on cigarettes go up, so does smuggling, study finds

More than half of the cigarettes for sale in New York are smuggled into the state illegally – the highest percentage in the country, according to a recent report from the Tax Foundation.

According to the non-partisan research group, increased excise taxes on cigarettes to discourage smoking have, in fact, created lucrative incentives for black market trafficking between states.

According to the report, 56.9 percent of the cigarettes sold in the Empire State are brought in from other states. New York state has the highest cigarette taxes in the country – a whopping $4.35 a pack. If you live in New York City, it’s another $1.50 per pack, bringing taxes to $5.85 per pack, with the overall cost of a pack in the city in the $12 to $15 range.

Arizona is the country’s second largest net importer of smuggled smokes with 51.5 percent of its cigarettes smuggled in illegally. New Mexico follows at 48.1 percent, Washington at 48 percent and Wisconsin at 34.6 percent, according to the survey.

Arizona’s $2 cigarette tax is also among the highest in the Southwest and ranks twelfth highest in the country.

Across the country, cigarette taxes rose in 30 states and the District of Columbia between 2006 and 2012.

“Public policies often have unintended consequences that outweigh their benefits,” Joseph Henchman, one of the authors of the Tax Foundation study, wrote. “One consequence of high state cigarette tax rates has been increased smuggling as criminals procure discounted packs from low-tax states to sell in high-tax states.”

The Tax Foundation report also pulled data from “peer-reviewed studies,” including “Tobacco Control,” which looked at packs of cigarettes found as litter in five northeast cities. Of those examined, 58.7 percent of them did not have proper local stamps.

The states which had the highest outbound smuggling rates were New Hampshire at 24.2 percent, Wyoming at 22.3 percent, Idaho at 21.3 percent, Virginia at 21.2 percent and Delaware at 20.9 percent.

Smuggling, according to the report, includes counterfeit state tax stamps, hijacked trucks, counterfeit versions of legitimate brands and officials turning a blind eye.

According to the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives, even though authorities have taken steps to reduce cigarette smuggling, nearly $5 billion in revenue in 2010 was lost because of smuggling.