By Staff
MIDLAND – The Michigan cigarette excise tax of $2 per pack has made cigarette smuggling a profitable option for small-time bargain hunters and commercial traffickers alike, according to a new study by the Mackinac Center for Public Policy.
The study's authors estimate that nearly 35 percent of all cigarettes consumed in Michigan in 2006 were smuggled in – more than half of Michigan's legal cigarette market.
"Lansing politicians should be wary of practicing prohibition by price," said Michael D. LaFaive, Mackinac Center director of fiscal policy and one of the study's three co-authors.
"Cigarette taxes may reduce smoking somewhat and they may raise tax revenues, but they can also yield consequences similar to our failed experiment with liquor prohibition – smuggling, illicit consumption, adulterated products and violence against police and civilians alike."
The study contains smuggling estimates for 47 of the 48 contiguous states from 1990 to 2006 and in 2006 alone. The authors also estimate what percentage of the total market is generated from "casual" smuggling – typically an individual consumer crossing a state border in search of a good bargain – and large-scale "commercial" smuggling. From 1990 to 2006, the annual estimated tax-induced smuggling as a percentage of total consumption in Michigan was 16 percent, fifth highest in the nation. More than 6 percent of Michigan's total was due to casual smuggling and another 11.6 percent due to commercial smuggling.