High-Tax California Is the Nation’s Cigarette-Smuggling Capital

A levy of nearly $3 a pack has spawned a lucrative black-market trade in out-of-state smokes

By Michael LaFaive and Todd Nesbit. Mr. LaFaive is senior director of fiscal policy at the Mackinac Center for Public Policy. Mr. Nesbit is an assistant professor of economics at Ball State University. Excerpts:

"The Golden State has banned some popular cigarettes while jacking up taxes on the smokes that remain."

"More than half of cigarettes smoked in California—53%, to be exact—evaded or avoided the state’s cigarette mandates and levies. That’s a stunning rise from a decade ago, when 28% of cigarettes were smuggled into the Golden State."

"A 2017 California law raised the cigarette tax from 87 cents to $2.87"

"California then banned menthol cigarettes, which make up roughly a third of the nation’s cigarette sales"

"In May, Customs and Border Protection officials in Southern California confiscated 150,000 illegal cigarettes from cruise-ship passengers disembarking from Mexico. In April the state attorney general charged five people with a $24 million tax fraud for allegedly illegally importing untaxed cigarettes."

"A 2022 study found that even before the menthol ban and $2 tax hike, 36% of respondents said they had brought cigarettes into California from elsewhere in the previous year. A 2023 study of discarded cigarette packs conducted across California found that of 15,000 cigarette packs collected, 45% didn’t bear the state’s tax stamp."

"heavy-handed cigarette policies have led to delivery-truck heists, armed retail thefts, and even a murder-for-hire plot."

"Last year a former prison guard was indicted for his role smuggling tobacco into Solano State Prison, near Sacramento."

"Lower-taxed states are a major source of cigarettes to high-taxed ones. Wyoming’s smuggling export rate is 55%. Idaho’s is 28%."