ALBANY — New York's high taxes on tobacco products have led to an explosion in cigarette smuggling and provided the black market with a major source of profit, according to a national survey by the Tax Foundation.

The foundation, a non-profit think-tank, estimates that 56.8 percent of all cigarettes consumed in New York come from smuggled sources.

That troublesome statistic was enough to put New York at the top of the charts among states when it comes to the rate of untaxed cigarettes that find their way to consumers.

 

HIGH TAX BLAMED

The high rate of smuggling is linked to the fact that New York has the highest state cigarette tax in the nation: $4.35 per pack, with an additional $1.50 added in New York City.

Smuggling cigarettes into New York has increased by nearly 60 percent since 2006, a period during which the tax rate on smokes soared by 190 percent, the foundation noted.

 

HIT TO STORES

The surging black market for cigarettes has taken a significant toll on mom-and-pop and chain-store retailers across the state, said James Calvin, director of the New York State Association of Convenience Stores.

He said he and other business advocates warned lawmakers a decade ago that they were paving the way to more smuggling by jacking up cigarette taxes without having an effective way to combat the illicit trafficking.

"What's going on now is costing legitimate licensed retailers and wholesalers billions of dollars in sales," Calvin said. "That money could have been used to reinvest in New York businesses and increase employment in New York."

 

LOSS OF LICENSE

State officials said they've come up with a new tactic to fight cigarette smuggling: stripping retailers of their state-issued licenses to sell lottery and alcoholic beverages if they are found guilty of selling untaxed smokes.

The initiative was hatched last month by three state agencies: the Tax Department, the Gaming Commission and the State Liquor Authority.

James Gazzale, spokesman for the tax agency, said the goal is to deter those who would facilitate smuggling.

Items such as cigarettes, lottery tickets and beer are products that provide retailers with significant revenue, he noted.

 

STRIKE FORCE

Calvin said illicit smuggling has continued to bloom in New York even after the state launched a "cigarette strike force" to crack down on the black market in 2014.

The Cuomo administration reported last December that the strike force seized 53,307 cartons of contraband cigarettes and 261,220 untaxed cigarettes in 2016.

Meanwhile, the Tax Department collected more than $1 million in penalties and fines from those involved with the illegal sale of untaxed tobacco.

Calvin lamented that it is likely too late now to knock back smuggling by easing up on New York's high taxes on cigarettes.

"The problem is that the black-market infrastructure has become well-established," Calvin said.

"Once the black market has developed a regular customer base, it becomes almost impossible for the state to muster enough resources to halt the illegal trade because of the scale of pervasive tax evasion."

 

SMOKER NUMBERS

The availability of cheaper cigarettes, meanwhile, has hurt the state's efforts to persuade smokers to quit the habit, he contended.

According to the latest data from the Centers for Disease Control and Prevention, an estimated 14.2 percent of adults in New York smoke.

The State Department of Health estimates that smoking kills about 28,000 New Yorkers annually and that around 750,000 adult New Yorkers are living with serious smoking-related illnesses.

A statewide survey on smoking, updated in May, found that about 35,000 high-school students are smokers.

According to Smoke Free New York State, an anti-tobacco advocacy group, the average age for a person taking up smoking for the first time is 13.

 

Email Joe Mahoney at:

jmahoney@cnhi.com

 

 

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