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States Lost $5 Billion To Tax-Driven Cigarette Black Market

States have lost $5 billion in revenue this year to a black market for cigarettes fueled by huge tax disparities across the country.

Cigarette smugglers buy cigarettes in states with relatively low cigarette tax rates and selling them at a reduced, but still profitable price in states with high cigarette tax rates. They can buy a pack for about $5 in Virginia and sell it in New York for $8, making a huge profit and satisfying consumers used to paying $12 per pack.

Hardened criminals, organized crime networks and even terrorists are profiting from this black market and costing states billions. A ticker running on a website created by former federal agent Rich Marianos currently estimates that states have lost $5,071,308,158 so far this year.

Pennsylvania Gov. Tom Corbett signed a new cigarette tax for Philadelphia into law this year that is supposed to fund the city’s public schools. Corbett called the $2 tax a “steady funding source” for Philadelphia students, but critics worry the tax will drive consumers to surrounding cities and states with cheaper cigarettes, or fuel the existing black market. (RELATED: Cigarette Smokers Now Funding Philadelphia’s Public Schools)

If smugglers are caught, most criminals get what amounts to a slap on the wrist.

Marianos, who spent 27 years working at the Bureau of Alcohol, Tobacco and Firearms and Explosives, created the website, The New Tobacco Road, to advocate for stricter laws against smuggling cigarettes and to give law enforcement and politicians the resources they need to enforce current laws. (RELATED: Former ATF Agent: Empower Police To Nab Terrorists Smuggling Cigarettes)

Cigarette taxes have increased by 190 percent in New York City since 2006, but New York’s adult smoking rate has been climbing for three years, reported The Wall Street Journal. It’s currently at 16.1 percent — the highest it has been since 2008.

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