California’s cigarette taxes are so high that approximately 54.4 percent of cigarettes smoked in California in 2024 were smuggled into the state, the Washington, D.C-based Tax Foundation reported October 27.
“Growing cigarette tax levels and differentials have made cigarette smuggling both a national problem and a lucrative criminal enterprise,” the report stated.
California ranked as the no. 1 state for cigarette smuggling, or “buttlegging,” in the prior report, but was overtaken by New York, where smuggling accounts for 61.1 percent of cigarette consumption.
The foundation’s annual report is conducted in partnership with the Mackinac Center for Public Policy, using the most recent data available. The report does not include Alaska or Hawaii.
“As in previous years, the data show a strong positive relationship between cigarette smuggling and tax rates across the country,” the Tax Foundation stated. “New York retook its usual status as the nationwide leader in cigarette smuggling after being surpassed briefly by California last year.”
On the other end of the spectrum, net outbound smuggling rates – where cigarettes are purchased in the state and consumed elsewhere – were highest in Wyoming (58.6 percent) and Virginia (54.4 percent).
“Wyoming and Virginia are well-positioned to accept cross-border shoppers looking to avoid higher taxes in neighboring states and areas like Colorado and Washington, D.C.,” the report stated.
California’s tax is $2.87 per pack of 20 cigarettes, while New York’s is $5.35 per pack.
“Cigarette smuggling is costly for states,” the report stated. “We estimate that the forgone revenue from smuggled cigarettes totaled more than $4.6 billion in 2024. California lost nearly $1.4 billion in cigarette excise tax collections, and New York missed out on more than $1.2 billion.”
While the correlation between taxes and smuggling rates is strong in general, there are some anomalies. For example, Wisconsin has a $2.52 tax and a smuggling rate of 16 percent, Rhode Island has a $4.25 tax and an 18.5 percent smuggling rate, and Vermont – thanks to its proximity to New York – has outbound smuggling of 5.9 percent despite its $3.08 tax.