An estimated 61.1% of cigarettes consumed in New York in 2024 were smuggled, the highest share among states studied, according to a new analysis that puts the state’s forgone cigarette tax revenue at $1.23 billion.
The Tax Foundation report, published Oct. 26 using estimates developed with the Mackinac Center for Public Policy, places New York ahead of California’s 54.4%. New York’s estimated share rose from 51.8% in 2023, an increase of about 9.3 percentage points.
The researchers estimate that approximately 230.7 million packs consumed in New York in 2024 came through tax avoidance or evasion. Their definition of smuggling includes both individual purchases in lower-tax jurisdictions and larger commercial trafficking operations.
Higher taxes widen the price gap
New York’s cigarette excise tax increased from $4.35 to $5.35 per pack of 20 cigarettes on Sept. 1, 2023. That made 2024 the first full calendar year under the higher rate.
New York had the highest state cigarette tax in the report’s 2024 comparison. New York City’s additional $1.50 tax brought the combined state and city excise tax to $6.85 per pack.
The differences across state lines were substantial. Pennsylvania’s state tax was $2.60 per pack in 2024, $2.75 below New York’s. New Jersey’s was $2.70, a $2.65 gap.
The report identifies those price differences as an incentive for consumers to shop elsewhere and for traffickers to supply cigarettes outside New York’s taxed retail market.
New Jersey’s estimated net outbound smuggling rate increased from 2.5% to 13.3% as its tax gap with New York widened. That means the researchers estimated that cigarettes bought there were increasingly being consumed elsewhere, though the figures do not identify every shipment’s destination.
For New York retailers collecting the required taxes, the findings point to competition from sellers able to offer lower prices by avoiding those charges.
New York ranks second in estimated revenue losses
Although New York had the highest estimated smuggling share, California had the largest estimated dollar loss: about $1.36 billion, compared with New York’s $1.23 billion.
The report puts nationwide forgone cigarette tax revenue at more than $4.6 billion in 2024.
New York’s figure represents the state excise taxes associated with the estimated untaxed volume. It is a modeled revenue gap, rather than an audited finding that the state could recover the entire amount through enforcement or a tax change.
Lower-tax states can collect additional revenue when cigarettes purchased within their borders are consumed elsewhere. The researchers estimated that Virginia gained approximately $61.4 million in cigarette tax revenue from that trade.
The estimates measure more than criminal trafficking
The findings come from a statistical model comparing tax-paid cigarette sales with estimated consumption based on reported smoking rates.
The Mackinac Center’s methodology separates personal purchases in lower-tax jurisdictions from commercial smuggling. Its broad use of the term covers tax avoidance and evasion, so New York’s 61.1% estimate should not be read as the share supplied exclusively by organized criminal operations.
The model also relies on assumptions about cigarette consumption and reporting. The results are estimates of the market’s size, rather than a count of seized cigarettes or documented illegal transactions.
The analysis covers the 48 contiguous states and excludes Alaska, Hawaii and Washington, D.C. Its New York findings are statewide and do not provide separate estimates for the Finger Lakes or individual counties.
A recent Central New York case illustrates the enforcement issue. State Police reported seizing approximately 874,000 untaxed cigarettes — equivalent to 43,700 standard packs — during a March 31 traffic stop on Interstate 81 near Central Square in Oswego County. The driver faced felony tax charges.
Tax policy also carries public health goals
The Tax Foundation argues that high taxes and product restrictions can push purchases into illicit markets, weakening legal businesses and tax collections.
New York officials have defended higher cigarette taxes as a way to discourage tobacco use. Gov. Kathy Hochul’s office has described the $1 increase as part of an effort to make tobacco less affordable and less attractive to young people.
The Centers for Disease Control and Prevention identifies higher tobacco prices as an effective way to reduce demand.
The smuggling estimates address where cigarettes are purchased and whether state taxes are paid. Evaluating New York’s tax policy also requires measuring changes in smoking, quitting and health outcomes alongside revenue and enforcement costs.
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