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Six in Ten Cigarettes Smoked in New York Bought Elsewhere: Tax Foundation Reports $4.6B Smuggling Loss
The Tax Foundation released its annual state-by-state look at cigarette smuggling on October 26, and the headline is familiar: the higher a state's cigarette tax, the larger the share of its cigarettes that never passed through a legal, in-state register. The Washington-based think tank estimates that smuggled cigarettes cost states more than $4.6 billion in excise revenue in 2024, with New York and California alone accounting for roughly $2.6 billion of that gap.
What the Report Found
The analysis, written by excise-tax director Adam Hoffer and analyst Jacob Macumber-Rosin, compares legal cigarette sales in each state with survey-based smoking rates. The difference is treated as cigarettes that were smuggled in from lower-tax states, bought tax-free online or from tribal outlets, or supplied by counterfeiters. The model was built with the Mackinac Center for Public Policy and has been run every year for more than a decade.
New York reclaimed its usual top spot. The report estimates that 61.1 percent of cigarettes consumed in the state in 2024 were not purchased legally there, costing New York more than $1.2 billion in excise collections. California was close behind at 54.4 percent, with nearly $1.4 billion in lost revenue, the largest dollar loss of any state.
Top Ten Inbound-Smuggling States
- Massachusetts: 37.9 percent
- New Mexico: 37.6 percent
- Washington: 36.7 percent
- Minnesota: 33.3 percent
- Maryland: 31.7 percent
- Arizona: 29.6 percent
- Oregon: 27.7 percent
- Illinois: 25.2 percent
The flow runs the other way in low-tax states. Wyoming and Virginia posted the highest net outbound rates, at 58.6 percent and 54.4 percent, meaning more than half the cigarettes sold there were carried across a border to be smoked in a higher-tax state or city. The authors single out Virginia's proximity to Washington, D.C., and Wyoming's proximity to Colorado as the drivers.
The report also notes that the two states with statewide menthol bans, California and Massachusetts, sit near the top of the smuggling table. It argues that product bans behave like very high taxes: they do not eliminate demand, they move it off the books.
How This Compares With Last Year
The Tax Foundation's previous edition, covering 2022, estimated $4.7 billion in annual losses and tallied $79.4 billion in forgone revenue across 2007 to 2022. The 2024 figure of $4.6 billion suggests the problem has plateaued at a high level rather than improved. New York and California have led the rankings in nearly every edition.
The Counterpoint
Public-health groups generally dispute the framing. They point out that the same high taxes are credited with lowering smoking rates, and that the smuggling estimates depend on survey-reported consumption, which can swing from year to year. State revenue agencies in New York and California have also stepped up enforcement, including California's multi-agency raids this fall, which the report's revenue figures do not yet reflect.
The Tax Foundation's answer is that enforcement costs money too, and that the data show a consistent relationship between tax rates and illicit share across all 50 states.
What it Means for Shoppers and Retailers
For adult consumers in high-tax states, the report is a reminder that a suspiciously cheap pack from an unlicensed seller is probably untaxed or counterfeit, and that buying it can carry legal risk. For licensed retailers, including online stores that ship cigars, pipe tobacco and other products subject to state excise taxes, it explains why states keep tightening licensing, reporting and shipping rules.
Every point of illicit share is revenue a legislature wants back, and the usual response is more paperwork for the compliant seller, not less. While this report focuses on cigarettes, the same tax logic applies to cigarillos, pipe tobacco and nicotine pouches. States that lose cigarette revenue to smuggling have been the most active in extending excise taxes to other tobacco products.
The Bottom Line
The Tax Foundation's 2024 numbers do not break new ground, but they quantify a pattern that keeps shaping state policy: steep cigarette taxes and flavor bans push a large share of sales into the gray and black markets, and states respond with more enforcement and more rules for everyone else. Expect New York and California to stay at the top of the list, and expect their legislatures to keep looking for the missing money.