According to a recent report from Washington ‘think tanks’ Arizona has one of the highest rates of smuggled cigarettes.
The Tax Foundation, a nonpartisan group that advocates for transparent taxation, in conjunction with the Mackinac Center for Public Policy, found that almost half of all cigarettes consumed in Arizona were smuggled into the state.
That puts Arizona in second place in terms of smuggled cigarette consumption in the nation in the year 2014 only falling behind New York.
To estimate the smuggling rates of each state, the researchers used statistical analysis of available data and pointed the blame towards higher cigarette taxes.
The reports said that since the year 2006, the Arizona’s cigarette tax has raised over 70 percent, from previously at 82 cents to now $2. While the state moved five spots in terms of smuggled cigarette consumption.
Because of the higher tax rates a smuggler will buy cigarette packs by visiting a neighboring state which has a lower tax on cigarette or else he would go to the nearby Indian reservations as they sell cigarettes at a lower price.
The report suggests that because of the high tax rate, a "casual smuggler" will buy cigarette packs in neighboring states with lower taxes — or go to the nearby Indian reservations that sell cigarettes at a lower price.
Scott Drenkard the director of state projects for Tax foundation and also the coauthor of the study said “The relationship between higher cigarette tax rates and higher smuggling, policymakers should consider all these issues when they determine if a tax increase on cigarette is appropriate or not.
In fiscal year 2014, almost $500 million was collected from cigarette taxes in the state. About half of the cigarette tax is dedicated to health programs.
A Tax Foundation report looking at 2012 numbers showed similar findings.
AMandeep
