(The Center Square) – A new study shows that a large number of Illinoisans may be buying their cigarettes from nearby states.
The Tax Foundation compared 2022 census data and cigarette sales figures to try to determine the percentage of out-of-state cigarettes being consumed.
Illinois, which adds nearly $3 in taxes on a pack of 20, is ranked 10th in the nation for cigarette smuggling. The study shows that over a quarter of the cigarettes consumed in Illinois are smuggled.
“For Illinois, our data tells us there are a lot more cigarettes being consumed in the state than the tax sales data would suggest,” said Adam Hoffer, director of Excise Tax Policy.
Hoffer added that the primary driver of the amount of cigarette smuggling is the relative magnitude of a state’s excise tax.
The state that gains the most from cross-border cigarette shoppers is Indiana, with a net revenue gain of more than $68 million a year. Chicago’s cigarette tax is over $7 a pack, the highest of any city in the country.
Hoffer said cigarette smuggling costs state governments billions of dollars a year.
“I think taxes are one of the biggest causes that drive smokers to other areas to buy cigarettes,” said Hoffer. “Illinois has a higher tax than most of the surrounding areas.”
Previous Tax Foundation research showed that Illinois loses nearly $300 million a year in tax revenue to illegal cigarette sales.
The study notes that a smuggler who legally purchases cigarettes in a low-tax area, such as Missouri, and then sells the cigarettes in a high-tax area like Illinois, still pays taxes and buys American-made goods. The tax gain for Missouri is less than the tax loss for Illinois.
The study found that New York is the state with the largest cigarette smuggling problem, with 54% of consumption smuggled. At $5.35 for a pack of 20, New York State’s cigarette tax is the highest in the nation.