For several years, state and local governments have imposed high “sin” taxes on cigarette packs, aiming to motivate smokers to quit for economic reasons. As is happening in states that impose high taxes on legal cannabis, if the taxes get too high, they prop up a black market.
Residents of New York City face the highest cigarette taxes of any jurisdiction in the country at $7.63 (including federal, state, and city excise taxes), making the average 20-pack cost $14.55. As expected, these taxes have led to a thriving black market for tobacco cigarettes, some smuggled in from other states and others sold as loose cigarettes, known as “loosies.”
The government-created black market has added another reason for police to interact with citizens involved in peaceful, voluntary transactions. Some of these encounters have turned violent—even fatal—like the well-known story of Eric Garner, whom police arrested for selling loosies and who died from a chokehold in the summer of 2014.
Eleven years later, policymakers still haven’t learned, and the cigarette black market in New York City remains strong. To better understand the scope of the black market, researchers at Rutgers University examined littered cigarette packs to check for tax stamps and, if absent, traced their origins. They collected packs in 30 census tracts across all five boroughs of New York City. To ensure the results were comparable over time, they employed the same methods as previous studies. They shared their findings in BMJ Tobacco Control last month.
The report’s conclusion:
This study found that in 2024, the percentage of littered packs bearing the proper NYC tax stamp declined to 16.6%. Georgia surpassed Virginia as the primary source of littered cigarettes. Packs with no stamp increased, rivalling Virginia as the second most common type of littered packs. Last, Newport’s menthol cigarettes were the dominant brand. Declining smoking rates suggest NYC’s tobacco control policy has made progress. However, the persistence of illicit trade suggests additional interventions should be considered.
For context, New York City enacted several laws aimed at blocking adults’ legal access to cigarettes and cracking down on black market cigarette sales in 2017. New York State increased the tax on cigarettes in 2023 from $4.35 to $5.35 per pack.
After capping the number of untaxed cigarettes people could buy from New York State’s Native American reservations in 2011, bootleggers turned to out-of-state sources. The Rutgers researchers found Georgia to be the primary source of bootleg cigarettes at 27.8 percent, with Virginia close behind at 20.6 percent.
In their conclusion, the researchers wrote, “additional interventions should be considered.” Here’s a thought: instead of chasing bootleggers, drop the tax rate. Jack up taxes high enough, and it’s just prohibition by another name—and prohibition always delivers the same package: black markets, corruption, and violence.
