Tobacco taxes drive lucrative smuggling

April 18, 2011 at 12:34 PM
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WASHINGTON, April 18 (UPI) -- An illegal market in cigarettes, fueled by recent tobacco tax hikes, has spawned a smuggling industry attracting violent gangs and traffickers, officials said.

Cigarette taxes, increased in 27 states during the past three years with the intention of bringing revenue to cash-strapped local governments, have sparked a surge in tobacco trafficking as smugglers flood high-tax states with cigarettes from low-tax states, USA Today reported Monday.

"Everybody out there (involved in illegal trafficking operations) is tapping into tobacco," said Larry Penninger, acting director of the tobacco diversion unit of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

For example, Penninger said, traffickers can smuggle a truckload (typically 800 cases) of cigarettes from a low-tax state such as Virginia into New York and sell them at $13 a pack.

New York has the highest tobacco tax in the country.

Cigarette smuggling activities cost states and the federal government about $5 billion annually, U.S. government estimates say.

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