Study: Nearly 40 percent of cigs in Washington are contraband

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by CHRIS INGALLS / KING 5 News

Bio | Email | Follow: @cjingalls

KING5.com

Posted on November 5, 2012 at 11:40 PM

Updated Wednesday, Dec 4 at 3:50 PM

The KING 5 Investigators have obtained the findings of a soon-to-be published, nationwide study by the Mackinac Center for Public Policy in Michigan.  The public policy think tank studied cigarette smoking in most of the 50 states.

Mackinac found that 36 percent of all cigarettes consumed in Washington are contraband.  The study's findings reveal that, for the first time, nearly four out of ten cigarettes consumed in Washington are illicit.

"The bottom line here is that many governments are making tobacco products as valuable as illicit narcotics," said Mackinac's Michael LaFaive.

Contraband cigarettes are those for which Washington’s $3.02 per pack state tax have not been paid.  In 2010, as the financial crisis mounted, Washington state increased its cigarette tax by a dollar a pack to the fourth highest state tax in the nation.

The official numbers

The Washington Department of Revenue is about to release its own study of cigarette tax evasion. 
Spokesman Mike Gowrylow doesn’t expect the state’s figures to be as high as Mackinac’s.  He expects it will put the number of contraband cigarettes at about one in three.

“(That’s) substantial, go from one in four contraband cigarettes to one in three,” said Gowrylow of the increase in contraband smokes that followed the 2010 tax hike.

Big tax money

By the state’s estimate, illicit cigarettes cost Washington taxpayers a staggering amount of money.

In the state’s last estimate in 2011, 94,000,000 packs of contraband cigarettes were consumed.   At $3.02 per pack, that’s a tax loss of $284,000,000 per year.

Washington law requires that all cigarettes packs consumed in Washington bear a Washington tax stamp – proof that the tax has been paid.

Smugglers target Washington

In 2010, as Washington’s $1-a-pack hike went into effect, the KING 5 Investigators caught international cigarette smugglers in action.

Our hidden camera watched a woman in Seattle’s International District sell Marlboro cigarettes from the trunk of a car.  She charged about $5 a pack, nearly half the price commanded by honest retailers.

The cigarettes did not have a Washington tax stamp.

The following year the Bureau of Alcohol, Tobacco and Firearms made several arrests and seized boxes full of contraband cigarettes.

Agents said they busted a $24 million enterprise that mailed actual Vietnamese made Marlboro’s to the United States and sold them on street corners and in stores.

Casual smugglers

Officials say it’s hard to gauge how much of the smuggling that produces contraband cigarettes is from criminal organizations and how much is what is called “casual smuggling.”

Casual smugglers are people who buy their cigarettes out of the state, where the tax is cheaper, for their own personal use.

Idaho and Oregon both have much lower cigarette taxes than Washington.
 
Jim Read of Maple Valley told KING 5 that he used to have a friend ship him cartons of cigarettes from Idaho.  Now he rolls his own cigarettes at home using loose leaf pipe tobacco.  It's taxed at a lower rate that store-bought cigarettes.

"It comes out to about 99 cents at pack," said Read, comparing it to the $8 or $9 he would pay in a store.

Like a lot of smokers, the tax increase didn't force him to quit.  It just make him a little more creative.

"We know we have a problem," Read said on behalf of smokers.  "A lot of us try to stop. It's just hard."

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