January 14, 2013
Stanton A. Glantz, PhD
No surprise: In anticipation of ALA report, tobacco industry ally claims massive cigarette smuggling due to cigarette taxes
It’s just like clockwork. A few days before an important public health report that could damage the tobacco companies is due to be released, a “new” report pops up in the press designed to discredit or deflect the upcoming report.
This time the important public health report is the American Lung Association’s annual State of Tobacco Control, due to be released on Wednesady, January 16. This report, which grades the federal government and the states on a range of tobacco control policies, including tobacco taxes, tobacco control program funding, smokefree air, and cessation funding, almost always generates media and public attention.
That’s why it is not surprising that on January 8, the Mackinac Center, a right-wing think tank in Michigan with a long history of supporting the tobacco companies’ opposition to tobacco tax increases, posted a comment on its web site claiming that “Higher Cigarette Taxes Create Lucrative, Dangerous Black Market.” They even provided a chart showing state-by-state estimates of the smuggling, which was uncritically reported by the Sacramento Bee here in California.
Not surprisingly, the tobacco companies have financed Mackinac since at least the 1990s (for example, see money for 1995, 1996, 1997, and 1999), so one needs to consider the source when assessing Mackinac’s policy pronouncements.
There are two fundamental assumptions, buried on pages 73 and 74 in an appendix, in the original 2008 Mackinac report that the current claims are based on:
- Under-reporting of smoking prevalence is not a major concern for our study and any changes in the rate of under-reporting varies identically across all states and follows a linear trend.
- Smoking intensity does not vary across states and that it trends linearly through time.
Based on these two assumptions Mackinac uses the reported smoking prevalence and reported taxable sales to estimate what the differences are state-by-state, then attributes these differences to smuggling into or out of the states.
The reality is that both of these assumptions are wrong. The fact that people under-report smoking behavior is well established by comparing reported smoking behavior with objective measures of nicotine intake (using cotinine, a biomarker of nicotine; see for, example, some of these papers). In addition, there are wide variations in the number of cigarettes smoked per capita across states. (Mackinac could have looked up the numbers in Table 3 in Cigarette Smoking Prevalence and Policies in 50 States or computed it from Table 11 in the industry’s Tax Burden on Tobacco instead of assuming these differences away.)
Indeed, as in other areas the industry’s public statements about smuggling contradict what they are saying in private inside the companies.
This is not to say that there are no cross-border sales of cigarettes in the United States; there are. In California they amount to a few percent of consumption, way below the 36% Mackinac claims.
But, then, the tobacco companies and their paid apologists have never been about accuracy. It is all about protecting the companies’ profits, in this case almost certainly by trying to diffuse the implications for increasing the tobacco tax that will follow from upcoming report from the American Lung Association.
Comments
Mackinac shows high cigarette taxes go with low smoking rates
Actually, Stan, their data is interesting, when combined with CDC smoking prevalence to calculate cigarettes consumed per smoker per day by State, which I think is much more illuminating than per capita consumption. I divided the cigarettes per smoker per year (per capita packs sold by state times 20 cigarettes) from Mackinac by the (CDC state smoking prevalence) and by 365 to get the cigarettes per smoker per day. Then I sorted by state on Cigarettes per smoker per day. It appears that geography is the most important determinant, with Southern States and North Dakota leading the pack in puffing by smokers, and the Far West and the East Coast at the bottom, with anomalous results for DE & NH due to the large # of packs sold per capita. There does seem to be a correlation between tax rate and cigarettes consumed by smokers daily between the top 10 and the bottom of the barrel, even when DE & NH are included. Jim Repace
Here is the chart Repace prepared
<img alt="" src="/sites/g/files/tkssra4661/f/u9/Repace-chart.png" width="1068" height="981" /;
Mackinac's cigarette smuggling estimates don't add up
Stan,
The problem with the Mackinac Center for Pulbic Policy's report (also touted by the Tax Foundation) on cigarette smuggling is its estimation that two or three times more cigarettes were smuggled into 31 states (including many highly populated states) in 2011 than were smuggled out of 16 other states (including many lowly populated states).
Mackinac's estimated number of cigarettes "smuggled in to states" dwarfs their estimated number of cigarettes "smuggled out of states", which is easy to notice when looking at list of 47 states in ranked order (that the Tax Foundation issued) at http://taxfoundation.org/article/cigarette-taxes-and-cigarette-smuggling...
The Mackinac report also estimated that ;50% of cigarettes were smuggled into 3 states (NY, AZ, NM) and that ;28% of cigarettes were smuggled into 12 states (NY, AZ, NM, WA, RI WI, CA, TX, UT, MI, MT, SD), but that no state had more than 27% of cigarettes smuggled out of it. And Mackinac estimated that far more cigarettes were smuggled into 8 western states [i.e. AZ (54%), NM (53%), WA (48%), CA (36%), UT (32%), MT (29%), CO (16%), OR (15%)] than were smuggled out of 3 western states [i.e. WY (20%), NV (20%), ID (20%)].
I spent an hour on the phone with the report's authors (Mike LaFaive and Todd Nesbit) inquiring about the huge discrepency (as the number of cigarettes smuggled out of states should be similar to the number of cigarettes smuggled into other states). They said the methodology for their 2011 report is the same as their methodology for their 2008 report, which is delineated in the Appendix of their 2008 report at http://www.mackinac.org/10030";http://www.mackinac.org/10030
I've read the methodology and listened to their explanations, but neither make sense (unless between half to two-thirds of the cigarettes they estimated were smuggled into the 31 states were actually smuggled into the US from abroad. which I don't consider realistic, although Nesbit said that could explain the discrepency).
While I support efforts to reduce cigarette smuggling (which is why I oppose unwarranted and excessive taxation of tobacco products), and also support communicating and collaborating with tobacco companies, distributors and retailers to reduce contraband cigarettes, I don't consider the cigarette smuggling estimates by Mackinac to be accurate or reliable.
Bill Godshall
Executive Director
Smokefree Pennsylvania
1926 Monongahela Avenue
Pittsburgh, PA 15218
412-351-5880
mailto:[email protected]" target="_blank";[email protected]
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