BOSTON – The increase of a $1 per pack cigarette tax, plus the more than two-fold bump in chewing tobacco taxes is proving a boon for tobacco smugglers, tobacco companies told a Massachusetts state panel this week, State House News Service reports.
“I’ve heard some criminals celebrating tax increases,” said Steve Grimaldi, director of corporate security for Reynolds American Inc., to members of the Illegal Tobacco Commission. The state raised the rate in July, driving many residents across the state line to New Hampshire.
Massachusetts planned on the revenue from the higher taxes — estimated to be $157.5 million a year — to plug holes in the state budget. State Rep. Brad Hill pointed out during debates on the tax hike that increasing the tobacco tax would provide neighbor New Hampshire with a “stimulus package.”
“Every time you increase this type of a tax, you’re going to see an increase in sales in New Hampshire,” said Hill during a floor debate on the increase. “In New Hampshire within a month of passing the last tax increase, if you went to the smoke shops – I counted the plates – over 80% of the plates are Massachusetts consumers. That’s what’s going to happen.”
Grimaldi pointed to data from several nonprofit groups that showed New York’s illicit cigarette trade accounted for 60% of all cigarettes sold in 2011. Organized crime brings up Virginia cigarettes (taxed at 30 cents per pack) by the truckload for illegal sales in Massachusetts to skirt the $3.51 per pack tax.
“A lot of people don’t understand what is going on or the gravity of it. And it is a huge, big, big business,” said Grimaldi, who added that Virginia has been working on lowering tobacco smuggling. “Illicit cigarettes are now the currency of illegal organizations.”
The Massachusetts Department of Revenue has countered those claims by saying that revenue from tobacco sales is “pretty much on target with what we thought” it would be, said chief economist Kazim Ozyurt. Massachusetts estimates tobacco taxes would generate $688 million in 2013.