Big bust of smuggling ring unlikely to stem flow of illegal smokes
Smokers in New York have a choice when buying cigarettes: They can pay $13 for a pack with all the required city and state taxes included or they can pay half as much for smokes smuggled in from other states. Most are choosing the latter.
The city is now the nation's capital for tobacco smuggling. Nearly 57% of all cigarettes smoked here are carted in from out of state, the highest rate in the country, according to Tax Foundation data. Widespread bootlegging deprives the city and state of hundreds of millions of dollars in tax revenue every year, which is why authorities spend so much time trying to stop it.
Last week they revealed a big win, with the New York attorney general's office charging 17 individuals with smuggling 18 million cigarettes into the city, evading $3 million in taxes.
"The defendants ran a massive criminal enterprise," Attorney General Barbara Underwood said in a statement. "We have zero tolerance for those who try to game the system and cheat New Yorkers."
New York's smuggling problem includes rampant booze bootlegging. According to a 2016 Crain's investigation, one in every four bottles of liquor sold in the city has been smuggled in.
But cigarettes are a bigger problem, mainly because a lot more cartons of smokes fit in a car trunk than do cases of whiskey or vodka.
The latest tobacco-smuggling takedown, known internally as Operation Big Wheels, was led by the attorney general's office and the New York City Police Department, with assistance from the Department of Homeland Security and the New York state Department of Taxation and Finance, among other agencies. Investigators used wiretaps, GPS tracking, covert cameras and undercover agents to ensnare the ring.
A decade ago 36% of the cigarettes sold in the city were contraband. The spike in smuggling corresponds with the city and state raising tobacco taxes to curb smoking, a signature issue for Mayor Michael Bloomberg. State cigarette taxes of $4.35 per pack are the highest in the country, and in 2002 the city boosted its tax to $1.50 per pack from 8 cents.
From a public health perspective, increasing the levies has been an unqualified success. The latest city data show that 13% of New Yorkers smoke, compared with nearly 22% in 2002, a decline of nearly 450,000 people.
The downside is that the remaining puffers have figured out that cheap bootleg smokes are readily available, thanks to smugglers trucking up from North Carolina, where cigarettes are taxed at 45 cents per pack, or Virginia, where it's 30 cents.
Big tobacco companies aren't too concerned with smuggling, because their profits aren't affected by how much tax is added to the cost of a pack. Given the massive arbitrage opportunity, it's a little puzzling why any smoker in New York ever pays retail price.
Crain's NY
The city is now the nation's capital for tobacco smuggling. Nearly 57% of all cigarettes smoked here are carted in from out of state, the highest rate in the country, according to Tax Foundation data. Widespread bootlegging deprives the city and state of hundreds of millions of dollars in tax revenue every year, which is why authorities spend so much time trying to stop it.
Last week they revealed a big win, with the New York attorney general's office charging 17 individuals with smuggling 18 million cigarettes into the city, evading $3 million in taxes.
"The defendants ran a massive criminal enterprise," Attorney General Barbara Underwood said in a statement. "We have zero tolerance for those who try to game the system and cheat New Yorkers."
New York's smuggling problem includes rampant booze bootlegging. According to a 2016 Crain's investigation, one in every four bottles of liquor sold in the city has been smuggled in.
But cigarettes are a bigger problem, mainly because a lot more cartons of smokes fit in a car trunk than do cases of whiskey or vodka.
The latest tobacco-smuggling takedown, known internally as Operation Big Wheels, was led by the attorney general's office and the New York City Police Department, with assistance from the Department of Homeland Security and the New York state Department of Taxation and Finance, among other agencies. Investigators used wiretaps, GPS tracking, covert cameras and undercover agents to ensnare the ring.
A decade ago 36% of the cigarettes sold in the city were contraband. The spike in smuggling corresponds with the city and state raising tobacco taxes to curb smoking, a signature issue for Mayor Michael Bloomberg. State cigarette taxes of $4.35 per pack are the highest in the country, and in 2002 the city boosted its tax to $1.50 per pack from 8 cents.
From a public health perspective, increasing the levies has been an unqualified success. The latest city data show that 13% of New Yorkers smoke, compared with nearly 22% in 2002, a decline of nearly 450,000 people.
The downside is that the remaining puffers have figured out that cheap bootleg smokes are readily available, thanks to smugglers trucking up from North Carolina, where cigarettes are taxed at 45 cents per pack, or Virginia, where it's 30 cents.
Big tobacco companies aren't too concerned with smuggling, because their profits aren't affected by how much tax is added to the cost of a pack. Given the massive arbitrage opportunity, it's a little puzzling why any smoker in New York ever pays retail price.
Crain's NY
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