New York City has the highest cigarette taxes in the nation, but Rutgers Health research indicates that many smokers illegally avoid them.
Most cigarette packs littered on city streets came from out-of-state sources or bore no tax stamps, according to a study that suggests widespread evasion of the city's steep tobacco taxes.
Researchers who collected 252 discarded cigarette packs from across the city's five boroughs found that only 16.6% bore the proper New York City tax stamp, down from 39.3% in 2011 and 23.7% in 2015 when other teams conducted the same experiment.
The findings, published in Tobacco Control, based on systematic collection from 30 census tracts in February 2024, offer a unique window into consumption patterns by using litter as a proxy for where smokers obtain cigarettes.
"It's arbitrage," said Kevin Schroth, a researcher at Rutgers Institute for Nicotine and Tobacco Studies and lead author of the study. "If something is cheaper in one place and more expensive in another, people will find ways to profit by purchasing in the cheap place and selling in the expensive one. And because we can compare our findings to prior work, we can see that it may be a growing problem for New York City's tax collection. What's interesting, though, is that despite this trend, New York City's smoking rates are still declining. This might mean that part of a shrinking smoking population is very determined to get cheap, untaxed cigarettes."
The research revealed a notable geographic shift in cigarette trafficking patterns. Georgia emerged as the primary source of illicit cigarettes, accounting for 27.8% of the littered packs and surpassing Virginia's 20.6%. Packs with no tax stamps (which likely come from North Carolina or Indian reservations) comprised 20.2% of the sample, nearly doubling from 12.1% in 2015.
The study also highlighted the outsized role of Newport, a menthol brand that made up 43.3% of all collected packs. Some 89.9% of Newport packs lacked New York City tax stamps. This high percentage of menthol packs raises issues about smuggling's impact on health equity, the researchers said. Menthol use is far higher among Black and Latino smokers than white smokers, and cheaper illicit menthols may make it more difficult for people to quit.
With state and city taxes totaling $6.85 per pack plus a $1.01 federal tax, cigarettes sold legally in New York City are among the highest taxes in the nation. By contrast, cigarettes face 37 cents in taxes in Georgia and 60 cents in Virginia, allowing smugglers and their customers to split more than $6 in tax savings on every pack. (New Jersey's tax of $3 per pack might make it a destination for individual city smokers who want to save money without going far, but it appears to be too high for smugglers.) North Carolina imposes a 45-cent tax and does not require tax stamps. Indian reservations do not impose taxes or require stamps.
Schroth, who previously worked with the New York City Health Department on cigarette tax enforcement, described a retail system where legitimate and illicit cigarettes operate side by side. Some store owners hide untaxed cigarettes in secret compartments beneath counters or above drop ceilings, he said, while customers use code phrases like "special price" to signal their interest in tax-free products.
Local agencies conduct store sweeps, but cracking a supply chain that stretches down Interstate 95 is difficult.
Schroth said the most promising fix lies upstream. He pointed to a federal "track and trace" system Congress authorized in 2009 that would assign unique identifiers to packs and record transfers from manufacturer to distributor to retailer.
"With track and trace, you could pick up a littered pack in New York and see that it moved through a specific warehouse and into a specific store in Georgia," Schroth said. "That lets you focus enforcement on the points feeding the illicit market. It could also reveal sources of unstamped packs. The FDA would have to follow its rule-making process to execute this Congressional mandate."
The persistence of illicit trade creates a paradox for public health officials: While cigarette taxes are designed both to generate revenue and discourage smoking, the study's findings suggest they are high enough that a significant portion of the city's estimated 565,000 adult smokers may be circumventing the price increases meant to push them toward quitting.
Still, smoking rates in New York City have continued to decline even as tax evasion appears to have increased. Adult smoking fell from 14.3% in 2015 to 9.7% in 2022, below both the national average of 11.6% and the rest of New York State at 12.3%.
The researchers acknowledged limitations in their methodology, noting uncertainty about whether people who litter cigarette packs are more likely to buy smuggled cigarettes than others. However, they argued that comparing litter samples over time using identical methods provides valuable insights into changing patterns of tax compliance. rule-making
