States Seek to Stem Tide of Cigarette Smuggling

Illegal smokes are being transported up and down the East Coast’s I-95, nicknamed Tobacco Road.

March 26, 2014

RICHMOND, Va. – Rising taxes on cigarettes have triggered a swelling trade in smuggled smokes along the East Coast on I-95, Bloomberg reports. The interstate highway that runs from Maine to Florida has acquired a new nickname: Tobacco Road.

Maryland and Virginia lawmakers have cracked down on cigarette smuggling by raising fines for such activity, while Rhode Island and New Jersey legislatures are considering similar actions. Meanwhile, the Massachusetts Commission on Illegal Tobacco issued a recent report with ways to stem the flood of trafficking.

The rate disparity between cigarettes in tobacco-rich states like North Carolina and Virginia, and Northern states like New York runs as high as $4.18 per pack. “We are all-hands-on-deck as far as cigarette smuggling because it’s no longer a mom-and-pop operation,” said Maryland Comptroller Peter Franchot. “It’s something that significant criminal entities are involved in, and it’s a target-rich environment.”

The U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives estimates that tobacco smuggling siphons off between $7 billion and $10 billion in state and federal tax revenue annually, up from $5 billion a few years ago. Since 2000, more than 100 tax hikes have happened in 47 states, New York City and Washington, D.C.

New York City convenience store owner Alix Bamder said the illegal cigarette trade hurts his tobacco sales. Only when a close competitor shut its doors did his volume of cigarettes increase.

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