NYS Exposed: High cigarette taxes fuel the nation's biggest black market

February 12, 2018 06:52 AM

If you buy black market cigarettes in New York State, there's a chance your money goes to some scary places. More than half of the cigarettes sold in New York are black market. 

News10NBC found the number one reason is the state tax. 

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The tax on a pack of cigarettes in New York is almost $5.

What does that do? 

It cuts down on the number of people smoking. 

But it also sends people trying to save some money to the black market and that money can end up in the hands of organized crime and Al Qaeda. 

If you buy a pack of cigarettes in New York and it doesn't have an official "cigarette excise tax stamp" on it, you are buying black market cigarettes. The Bureau of Alcohol, Tobacco and Firearms says the biggest smuggling rings buy truckloads of cigarettes from the Carolinas and sell them in New York State tax free. 

Brean: "What terrorist organizations have gotten black market cigarette money?"
Steven Dickey, Special Agent-in-Charge ATF: "We have Al Qaeda and we have Hezbollah."
Steven Dickey is the Special Agent-in-Charge for the ATF in western New York. 
He says in the early 2000's, cigarettes were smuggled from a reservation in western New York to Detroit. The sales made millions of dollars and some of that black market money financed a group of six men from Buffalo to go an Al Qaeda training camp in Afghanistan. 

Brean: "That's the Lackawanna 6."
Steven Dickey, Special Agent-in-Charge ATF: "That is known as the Lackawanna 6 case, yes it is."
All 6 pled guilty to supporting Al Qaeda.

Scott Drenkard, Tax Foundation: "There are certainly documented stories of cigarette smuggling rings being used to fund Al Qaeda and Hezbollah."
Scott Drenkard is from the Tax Foundation, a tax and government watchdog group. 
A Tax Foundation study shows New York State has the highest cigarette taxes in the country and more than half of all cigarettes sold in New York are black market cigarettes.

Brean: "So what's the solution here?" 
Scott Drenkard, Tax Foundation: "The solution, this is going to sound so unpopular but it's really hard to tackle this problem even with increased enforcement. And so lower cigarette taxes is probably going to be necessary in the State of New York."

Try telling that to the American Cancer Society. 

Dr. Scott McIntosh, Dir. Center for Tobacco Free Finger Lakes: "High taxes is one of the most reliable ways to keep young people from starting to smoke and getting people who are current smokers to quit."
Look at these numbers. 

  • At the peak in the 1960's, 60 percent of adults in New York State smoked. 
  • Now it's 14 percent. 
  • 12 percent for young adults (ages 18 to 24).
  • 4 percent for teenagers. 
  • New York has the lowest youth smoking rate in the country. For adults, it's 9th.

Brean: "So high taxes on cigarettes work."
Dr. Scott McIntosh, Dir. Center for Tobacco Free Finger Lakes: "The main driver in decrease in adolescent smoking is price increases. It's purely economic."
So there's the rub. The number one thing that gets people to quit smoking is the same thing that drives the black market and the dangerous money it makes.

Steven Dickey, Special Agent-in-Charge ATF: "People are always looking for a good deal. Cigarettes are expensive and I do believe that if some people knew where the money was going they wouldn't be buying black market cigarettes."

Monroe County prosecuted more than a hundred black market cigarette cases in the last four years. Canadian border patrol seized more than a million dollars of illegal tobacco at the Peace Bridge last month. 

News10NBC asked the State Department of Tax and Finance how much money has the state lost because of the black market? And has any lawmaker proposed a bill to lower taxes on cigarettes? 

We're going to follow up with the state to get those answers.


Berkeley Brean

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