A study by Colombia University Mailman School of Public Health released in late June has found that raising the tax on cigarettes does create a market for the smuggling of cigarettes.

Increasing cigarette taxes is an effective strategy for reducing tobacco use but there may be negative consequences especially in disadvantaged minority communities. According to a study conducted by researchers at Columbia University Mailman School of Public Health, a dramatic rise in illegal street sales of untaxed cigarettes was reported among minority low-income persons immediately after the price increase that reinforced smoking and undermined cessation efforts.

The report discusses the role of the “$5 man”, which is “the commonly used term for a highly visible network of bootleggers who appeared after the tax increase”.

According to the study, most smokers admitted buying cigarettes from the $5 man throughout the community on street corners, in busy shopping areas, outside subway entrances, and in apartment buildings. Other accessible sources of reduced-price cigarettes, respondents noted, included “loosies” — single, out-of-package cigarettes sold illegally at local grocery stores or bodegas. Buying cigarettes out of state was another price-minimizing strategy.

According to the World Health Organization, between $25 to $30 billion is lost (pdf) in government revenues due to untaxed cigarettes.

For more information, please visit our Cigarette Smuggling page.