Background: Cigarette taxation is effective in reducing tobacco use in the USA. However, these benefits are reduced when taxes are unpaid. Cigarette trafficking (ie, the illegal importation of cigarettes into a high-tax jurisdiction from a lower-tax jurisdiction) is well documented in high-tax places like New York City (NYC), but the extent of trafficking in other northeastern cities is relatively unknown.
Objective: To estimate the extent of cigarette trafficking in Boston, NYC, Philadelphia, Providence and Washington, DC, and project the benefits of reducing cigarette trafficking for recouping lost taxes and reducing smoking in these cities.
Methods: Littered cigarette packs were collected from a random sample of Census tracts in five US cities. Data collection yielded 1439 total littered packs. The share of cigarette packs bearing proper local, known non-local, foreign or unknown, or no tax stamp was calculated for each city. These data were used to estimate tax revenue recovery if cigarette trafficking could be eliminated. We also estimated the extent to which eliminating cigarette trafficking would reduce cigarette consumption.
Results: Overall, 58.7% of packs did not have a proper local tax stamp, and 30.5-42.1% were attributed to trafficking. We estimate that eliminating cigarette trafficking would result in declines in youth smoking prevalence ranging from negligible in low-tax cities like Philadelphia to up to 9.3% in higher-tax NYC. We estimate that these five cities could recoup $680-729 million annually in cigarette tax revenue if cigarette trafficking was eliminated.
Conclusions: Reducing cigarette trafficking would increase the effectiveness of tobacco taxes in reducing smoking and generate additional tax revenue, particularly in higher-taxed cities. Federal action to reduce cigarette trafficking, such as a track-and-trace system, is needed.
Keywords: Economics; Price; Public Policy; Taxation.
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