The newest report from the Tax Foundation on the consequences of high state cigarette excise taxes reveals that 21.34 percent of the total cigarettes consumed in Montana are smuggled into the state. Montana ranks twelfth highest in the nation in terms of smuggled cigarettes.

The organization makes the point that crafting tax policy, often has, no matter how well-intentioned, unintended consequences that outweigh their benefits.

One notable consequence of high state cigarette excise tax rates has been increased cigarette smuggling as people procure discounted packs from low-tax states and sell them in high-tax states.

The data was based on 2017 during which Montana’s tax on a pack of cigarettes was $1.70, the same as it has been since 2006. During that time smuggling cigarettes into Montana has declined from 31.20 percent.

Growing cigarette tax differentials across states have made cigarette smuggling both a national problem and, in some cases, a lucrative criminal enterprise.

Cigarette smuggling also puts consumers at risk with counterfeit cigarettes and perpetuates a black market which negatively affects tax revenue.

New York and California have the highest inbound smuggling activity in the country, with an estimated 55.4 percent and 44.6 percent of cigarettes consumed in the state deriving from smuggled sources in 2017, respectively. New York has a tax of $4.35 (the highest in the nation) and California has a tax of $2.87. Missouri has the lowest tax rate of 17 cents.

New Hampshire has the highest level of outbound smuggling at 65 percent of consumption, likely due to its relatively low tax rates and proximity to high-tax states in the northeastern United States.

Following New Hampshire is Delaware (40.6 percent outbound smuggling), Idaho (26.8 percent), Virginia (24.2 percent), and Wyoming (22.4 percent).

Pennsylvania, following a cigarette tax increase from $1.60 to $2.60 in early 2016, has seen a significant increase in smuggling into the state.

Cigarette tax rates increased in 37 states and the District of Columbia between 2006 and 2017.

The data was based on 2017 during which Montana’s tax on a pack of cigarettes was $1.70, the same as it has been since 2006. During that time smuggling cigarettes into Montana has declined from 31.20 percent.