The open question here is whether New York is actually making less tax revenue on cigarettes due to its overtaxing of cigarettes. The question might be speculative if it weren’t for a figure like this.
New York has the highest cigarette tax rate of any state, and nearly two-thirds of the state’s cigarette market is illegal, announced the think tank Tax Foundation on Thursday.
his makes New York the biggest importer of black market cigarettes, along with the state’s highest tax rate of $4.35 per pack. That’s compared to Missouri, the state with the lowest rate, of 17 cents per pack.
In New York City the tax rate is even higher, adding another $1.50 per pack to the state rate. It’s not uncommon for smokers to pay $12 for a pack.
The report said that tobacco smuggling and the tax rate have risen practically in tandem since 2006. The New York State tax on cigarettes has risen 190% since that time, as the rate of smuggling increased 170%.
The faster the taxes go up, the more the market turns into the black market. This is a familiar enough phenomenon in Communist countries. Now all this might be economic fun and games, except for the troubling question of who profits from the smuggling.
Large scale cigarette smuggling networks in New York State are dominated by tight knit nationality-based networks, primarily families through blood or marriage of Lebanese, Yemeni, Jordanian and Palestinian descent.
Federal and New York State law enforcement officials estimate that nearly 60 percent of all convenience retail outlets in New York City are now Arab-owned, and with the Arab networks compartmentalized by ethnicity and family ties, the risk of infiltration by law enforcement is minimal.
In total, law enforcement officials in New York State estimate that well-organized cigarette smuggling networks generate between $200,000 – $300,000 per week. A large percentage of the money is believed to be sent back to the Middle East where it directly or indirectly finances groups such as Hezbollah, Hamas and Al Qaeda.