Welcome to New York City, the cigarette tax evasion capital of the East Coast. A new study of littered cigarette packs on the streets and sidewalks found that of 252 collected, just 17 percent had the official New York City tax stamp—down from 39.3 percent in 2011 and 23.7 percent in 2015. The findings reflect long-established truths about “carrot” versus “stick” approaches to drug use.
NYC is number one in unregulated cigarette sales because it has the country’s highest tobacco taxes. A pack of 20 legal cigarettes costs $14.55 or more; state and city taxes total $6.85 per pack plus a $1.01 federal tax. The 500,000 New Yorkers who smoke don’t want to pay those exorbitant prices, and smugglers with vans crammed full of cigarette cartons are happy to supply the Big Apple with a cheaper alternative while making a tidy profit.
“Illicit trade and trafficking of cigarettes has been in New York City for a long time,” lead study author Kevin Schroth, JD, an associate professor at Rutgers School of Public Health, told Filter. “This illegal market is found around the world because disparities in pricing across boundaries result in opportunities for people to profit off of those differences.”
The illicit cigarettes are often sold at the same stores as legal ones, stashed away in compartments until a customer uses code phrases like “special price” to signal they want to buy the tax-free versions, according to Schroth.
This is another version of the so-called “balloon effect” familiar to veterans of the drug war.
The attempt to halt New York’s illegal cigarette trade started upstate over a decade ago. Native American reservations, with their tax-exempt status to sell unstamped cigarettes, used to be the major supplier of untaxed cigarettes in NYC, as the study, published in the Tobacco Control journal, notes. In a 2011 crackdown, state authorities enforced a regulation capping the supply of untaxed cigarettes legally shipped to reservations. Excess cigarettes over that cap had to be taxed. That resulted in a switch in the sourcing of illicit cigarettes to Virginia.
This is another version of the so-called “balloon effect” familiar to veterans of the drug war. Enforcement efforts in one geographic area cause trafficking to simply relocate and emerge from a different area, merely displacing it while causing disruption and harm. Cigarettes may not be illegal, but taxation to the point of unaffordability has the effect, like prohibition, of creating illicit markets that are then targeted by law enforcement.
Cigarette trafficking patterns into NYC appear to have changed recently, according to the Rutgers researchers. Georgia, where the tax per pack is 37 cents, has now become the primary source of illicit cigarettes, and was the origin of 27.8 percent of the littered packs. Virginia, where the tax is 60 cents, is still in the game and made up 20.6 percent.
Out of 12 packs I picked up, eight had Georgia tax stamps and two had tax stamps from Virginia.
Walking around the South Bronx and Harlem, I tried collecting discarded packs myself. It’s notable that toxic cigarette litter, a major contributor to global plastic pollution, has not been the target of political attacks like discarded disposable vapes. Numerous countries have banned disposable vapes—low-barrier, safe alternatives to cigarettes—on the basis that they contaminate the environment.
Out of 12 packs I picked up, eight had Georgia tax stamps and two had tax stamps from Virginia. Ten were Newports, a menthol brand that made up over 43 percent of packs collected for the Rutgers study; almost 90 percent of Newport packs lacked NYC tax stamps. This is evidence that an attempt to ban menthol cigarettes will fail, as it has in Massachusetts. The researchers cautioned, “The role that menthol cigarettes, Newport in particular, play in illicit trade warrants attention as various levels of government consider bans.”
The study reports that the adult smoking rate in NYC declined from 14.3 percent in 2015 to 9.7 percent in 2022. “Even though the tax rates in New York City are high and the illicit market is very large, smoking rates have declined to a point where they are actually lower than smoking rates in the rest of New York State,” Schroth told Filter. “One of the things that we’re seeing is that New York City and State taxes are having a positive impact that’s consistent with their goal of reducing smoking rates and at the same time, the illicit market is providing an alternative for part of the population to avoid those high prices.”
But is the decline in smoking due to high taxes, or something else? Like thousands of people switching to safer nicotine products, such as vapes?
Deadly cigarettes are easy targets for politicians to tax more and more heavily. But many experts see these as regressive taxes, when the vast majority of people who continue to smoke are on low incomes. These “poor taxes” funnel massive amounts of money into state and federal coffers, while further impoverishing people who smoke.
Decades of drug-war history illustrate that punitive strategies don’t eradicate demand for popular drugs. What will work is allowing safer nicotine products to outcompete riskier ones.
The Rutgers study raises the issue of how to combat the illicit trade in cigarettes. The federal Family Smoking Prevention and Tobacco Control Act contains a provision to enact a “track and trace” system. “It enables law enforcement to look at a pack and easily identify where it was first legally sold,” Schroth explained. “With a track and trace system, we can know which retailers are participating in that market. That information would be pretty useful for law enforcement.”
Involving law enforcement agents in tobacco control via tracking and tracing should be rejected in favor of a tobacco harm reduction approach. Decades of drug-war history illustrate that punitive strategies don’t eradicate demand for popular drugs. What will work is allowing safer nicotine products (SNP) to outcompete riskier ones—which they will do, rapidly, if they’re less expensive and promoted as 95 percent safer than smoking.
Making SNP like flavored vapes and nicotine pouches widely available at low or no cost to people who smoke would dramatically undercut the illicit cigarette market. The millions of dollars collected from cigarette excise taxes could subsidize SNP provision.
Instead, the New York State Department of Health in collaboration with the New York State Police has just gone full drug-war on the vape industry. On September 3, over a dozen people from all over the state were arrested and a total of 38 criminal charges for illegally shipping vaping products in violation of state law were filed against them.
Since 2020 it has been illegal to sell flavored vapes and to ship them to consumers and unlicensed businesses. But just as the illicit market for low-tax cigarettes is thriving, so is the illicit market for flavored vapes.
“Combustible cigarettes are the most dangerous consumer product in the history of the world. Getting people to move away from them can only be positive.”
Governor Kathy Hochul (D), using the tried-and-true prohibition canard “the kids,” said: “These companies built their business models around breaking New York’s laws and targeting our kids—now, we’re holding them accountable. With the largest criminal vape enforcement operation in state history, New York is sending a message: if you sell vapor products in violation of our laws, you will face serious consequences.”
Actually, the “serious consequences” of the drug war on businesses that sell vapes is the real crime. Flavored nicotine vapes need to be viewed as a safe supply for people who quit smoking. Prohibition drives them back to cigarettes.
Schroth acknowledges the evidence that making a complete switch from combustible tobacco products to less harmful nicotine options like vapes brings health benefits. “Combustible cigarettes are the most dangerous consumer product in the history of the world,” he told Filter. “Getting people to move away from them can only be positive.”
Photographs by Helen Redmond
The Influence Foundation, which operates Filter, has received unrestricted grants from Reynolds American, Inc., the parent company of the manufacturer of Newport cigarettes. Filter’s Editorial Independence Policy applies.