Federal and State Governments Must Strengthen Efforts To Combat Cigarette Smuggling

Washington, DC — The Washington Post reported this week that the federal Bureau of Alcohol, Tobacco, Firearms and Explosives is cracking down on cigarette smuggling because of evidence that smuggling proceeds are being used to fund terrorist groups. While the ATF’s actions are helpful, efforts to combat cigarette smuggling have been hampered for too long by weak laws and poor enforcement at both the federal and state levels. The answer to the cigarette smuggling problem is two-fold: Congress and the states should enact common-sense measures long advocated by the public health community to strengthen and better enforce laws against smuggling, and states that have incredibly low cigarette tax rates should increase them, thereby eliminating price disparities that facilitate smuggling.

Rather than support real efforts to reduce cigarette smuggling, the tobacco companies argue that states should stop raising their cigarette taxes and even cut them back. But this would be giving in to cigarette smugglers at the expense of our nation’s kids and health. Illegal cigarette smuggling should be no more excused or tolerated than other serious crimes. The tobacco companies are acting purely out of self-interest. They know that, despite any cigarette smuggling that may be occurring, cigarette tax increases remain a highly effective tool for states to reduce smoking and its many harms and costs, especially among kids, and raise much-needed revenue. Every single state that has significantly increased its cigarette taxes in recent years has significantly increased its revenues, even while reducing cigarette sales. Enhanced anti-smuggling efforts will deliver even more health and fiscal benefits by keeping cigarette prices high and cracking down on tax avoidance.

Current law enforcement efforts against cigarette smuggling are limited by weak laws and inadequate tools both at the federal and state levels. Congress should address the smuggling problem by passing legislation that increases civil and criminal penalties; establishes labeling, tracking and record-keeping requirements so law enforcement officials can determine the source and track the paths of smuggled cigarettes; and tightens regulations governing block sales of cigarettes. Such legislation has been introduced in previous sessions of Congress, but unfortunately has languished without action. The U.S. Senate has taken an important first step by passing the PACT Act, legislation to curtail Internet-based cigarette smuggling and strengthen existing contraband tobacco product laws, and the House should quickly follow suit. Importantly, the PACT Act would remove a significant obstacle to federal law enforcement action by reducing the number of smuggled cigarettes necessary to make interstate smuggling a federal crime from 60,000 to 10,000.

Additional steps that individual states can take include increasing penalties and enforcement, improving state tax stamps on cigarette packs to make them harder to counterfeit, forbidding retail sales not for personal use, establishing hotlines for reporting smuggling, and protecting and encouraging whistleblowers. Every dollar spent on increased enforcement can bring in tens of thousands of dollars in additional new revenues.

In addition, states that still have incredibly low cigarette tax rates of only a few pennies per pack should raise them to at least the national average, which would largely eliminate the supply of low-cost cigarettes for interstate smuggling. While the average state cigarette tax is currently 74.4 cents per pack, the major tobacco states’ average is only 15.3 cents per pack, with Kentucky, North Carolina and South Carolina taxing at three, five and seven cents per pack, respectively (even Virginia, one of the major tobacco states, recently decided to raise needed revenues and promote public health by raising its 2.5 cent cigarette tax to 20 cents per pack on Aug. 1 and to 30 cents per pack on July 1, 2005). In addition to raising their extremely low cigarette tax rates, North Carolina and South Carolina should also start marking their packs with state tax stamps (just like all other states do) to make cigarettes sold there harder to smuggle into other states for resale without being detected. While professing concern about cigarette smuggling, the tobacco companies are leading the fight against even small increases to the low cigarette tax rates in these supplier states.