In his article, ‘3 Out of 5 Cigarettes Sold in State With Highest Cigarette Taxes are Smuggled‘, Daniel Greenfield exposes black market sales of cigarettes in NY.
The open question here is whether New York is actually making less tax revenue on cigarettes due to its overtaxing of cigarettes. The question might be speculative if it weren’t for a figure like this:
…The Tax Foundation said that 60.9% of cigarettes sold in New York State are smuggled in from other states.
In New York City the tax rate is even higher, adding another $1.50 per pack to the state rate. It’s not uncommon for smokers to pay $12 for a pack.
The report said that tobacco smuggling and the tax rate have risen practically in tandem since 2006. The New York State tax on cigarettes has risen 190% since that time, as the rate of smuggling increased 170%. …
The faster the taxes go up, the more the market turns into the black market. This is a familiar enough phenomenon in Communist countries. Now all this might be economic fun and games, except for the troubling question of who profits from the smuggling:
Large scale cigarette smuggling networks in New York State are dominated by tight knit nationality-based networks, primarily families through blood or marriage of Lebanese, Yemeni, Jordanian and Palestinian descent.
Federal and New York State law enforcement officials estimate that nearly 60 percent of all convenience retail outlets in New York City are now Arab-owned, and with the Arab networks compartmentalized by ethnicity and family ties, the risk of infiltration by law enforcement is minimal.
In total, law enforcement officials in New York State estimate that well-organized cigarette smuggling networks generate between $200,000 – $300,000 per week. A large percentage of the money is believed to be sent back to the Middle East where it directly or indirectly finances groups such as Hezbollah, Hamas and Al Qaeda.
This information would seem to confirm an older article from the Northeast Intelligence Network:
According to the same federal source providing information to the Northeast Intelligence Network, Detroit is the main center of Hezbollah’s fundraising activity in the U.S. Their international operational budget is estimated to be $200-$500 million annually, including $100 million in contributions provided directly by Iran. Other sources of funding include Syria, U.S. and other national charitable organizations, individual donations, legitimate business, and illegal trade such as illegal arms trading, cigarette smuggling, currency counterfeiting, credit card fraud, theft, operating illegal telephone exchanges, and drug and arms trafficking.