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Business Observer Friday, Feb. 14, 2020 5 months ago

Florida smokers puff on largest tax increase

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Florida led the nation on a percentage basis in increased cigarette taxes from 2006 to 2017.

At nearly 300%, Florida has increased its excise taxes on a pack of smokes more than any other state over the past decade. Through 2017, the tax equated to what’s now a $1.34 levy per pack.

During that same time, 2006-2017, the inflow of smuggled cigarettes in Florida is 15.2%, according to a new Tax Foundation study that analyzes the relationship between cigarette taxes and smuggling. “One notable consequence of high state cigarette excise tax rates has been increased smuggling as people procure discounted packs from low-tax states and sell them in high-tax states,” the report states. The Mackinac Center for Public Policy, a Michigan think tank, compiled the data. “Growing cigarette tax differentials have made cigarette smuggling both a national problem and, in some cases, a lucrative criminal enterprise.”

While Florida’s inbound cigarette smuggling rate is on the rise, up from 6.9% in 2006, the state is in better shape than others, the report shows. Overall, its 15.2% smuggling rate ranks No. 16 nationally — in between Illinois and Pennsylvania.

New York, for one, has the highest inbound smuggling activity nationwide, the report shows, with an estimated 55.4% of cigarettes consumed in the state deriving from smuggled sources in 2017. California, at 44.6%; Washington, at 42.8%; New Mexico, at 40.8%; and Minnesota, at 34.6%, follow the Empire State. New York, at $4.55 per pack in taxes, and California, at $2.87 per pack, have some of the highest excise taxes on smokes in the country.

The survey’s focus on taxes somewhat hides a business axiom that’s hard to extinguish: Few things can ever beat out the principle of supply and demand.

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