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Cigarette smuggling in Florida increases

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Updated: 9/06/2013 3:39 pm
ORLANDO, Fla. -- Since 2006, Florida's tax on cigarettes has increased 294 percent. In that same time, the number of cigarettes smuggled into the state has more than tripled.

The cause and effect of increasing consumer taxes and the inflow of unregulated cigarettes is a problem experienced by all but 16 states.

However, in no state is the problem more acute than in Florida.

"That's just way too high for a substance that should otherwise be controlled," said Dominic Calabro of Florida Tax Watch, a nonpartisan state watchdog group.

Florida increased the tax on a pack of cigarettes from $0.339 to $1.339 on July 1, 2009.

The $1 increase mirrored increases made by other states that at the time were looking for a way to raise additional tax revenue without increases in conventional taxes such as sales tax and in some states income tax.

From 2009 to 2010, 20 states as well as Washington, D.C., implemented tax increases on cigarettes.

The increases in cigarette tax were not mirrored in every state.

While some states like New York and Arizona are battling the highest smuggling rates in the county, other states like Virginia and Georgia are experiencing an outflow.

States with lower tax burdens, like Georgia, are prime targets for smugglers who can buy the packs, paying just $0.37 per pack in taxes and then reselling them in Florida for an almost $1 per pack profit.

"It's not the single person buying one or two packs or even a few cartons," said Congressman Alan Grayson (D - 9th District)

Grayson said the interstate smuggling is a symptom of supply and demand.

"That's why smuggling is so successful when it comes to tobacco, you can move tobacco very easy and quickly and avoid the taxation of up to $4 a pack that some states impose," Grayson said.

At the time of the tax increase, Florida was 26th in the nation in cigarette smuggling.

Since then Florida has jumped nine spots to No. 17 on the Tax Foundation's list of cigarette smuggling.

The report, compiled at the end of 2011, shows 19.1 percent of all cigarettes consumed in the state are smuggled in, up from just 6.9 percent in 2006.

According to the Florida Department of Business and Professional Regulation, the state collected $1.24 billion in cigarette tax revenue in 2012. Based on the Tax Foundation's numbers, the state lost almost a quarter of a million dollars in uncollected tax due to smuggling.

"That $240 million a year could do a lot for our school system, a lot for public safety," said Calabro. "When it comes to enforcement, Florida tax watch believes the juice is worth the squeeze; economically, financially and improving citizen confidence."

In Florida, the Division of Alcoholic Beverages and Tobacco regularly responds to and investigates complaints regarding unstamped cigarettes, however, the interstate trafficking of cigarettes falls under federal jurisdiction.

"It's a problem that can only really be effectively solved by the federal government," Grayson said.

He points to a $60 million cut in the ATF as one reason smuggling has increased in so many states with higher taxes on cigarettes.

Florida Tax Watch said it warned state lawmakers in 2009 about the possible uptick in smuggling, not as a deterrent to imposing the tax, but as a cautionary measure to make lawmakers aware of the possible unintended consequences associated with higher taxes on cigarettes in the state.

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