Cigarette taxation, regulation, and illicit trade in the United States

Abstract

Tobacco products are highly taxed and regulated in the United States to deter consumption and raise revenues. These restrictions, especially differences in taxation by jurisdiction, invite an illicit trade in tobacco products (ITTP), particularly in cigarettes (illicit retail trade in cigarettes or IRTC). This IRTC amounts to billions of dollars annually in lost tax revenues, reduces the efficacy of smoking reduction efforts, and imposes the other attendant costs of a black market. Stricter controls may invite further evasion, presenting challenges to enforcement.