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updated: 3/25/2014 11:35 AM

Wisconsin 5th-largest importer of smuggled smokes

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Associated Press

KENOSHA, Wis. -- Wisconsin is the country's fifth-largest importer of smuggled cigarettes, according to a report.

The Kenosha News reports in Monday's editions that the report from the Tax Foundation, an independent tax policy research organization, found 34.6 percent of the cigarettes sold in the state have been brought in from other states and haven't been taxed, have been improperly taxed or were counterfeited. New York led the nation at 56.9 percent. Arizona was second at 51.5 percent, New Mexico was third at 48.1 percent and Washington was fourth at 48 percent.

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Joseph Henchman, one of the report's authors, said the disparity in cigarette prices between low-tax and high-tax states is driving smuggling. Thirty states have raised cigarette taxes over the last two years in hopes of discouraging people from smoking.

"Public policies often have unintended consequences that outweigh their benefits," Henchman wrote. "One consequence of high state cigarette tax rates has been increased smuggling as criminals procure discounted packs from low-tax states to sell in high-tax states."

Smuggling includes counterfeit state tax stamps, hijacked trucks, counterfeit versions of legitimate brands and officials turning a blind eye, according to the report. Large criminal operations have been hijacking trucks and stealing tax stamps and small-time street hustlers are buying cartons of cigarettes and selling packs for less than market prices.

"Smuggling has become a big business," said Scott Drenkard, a Tax Foundation economist. "It's like de facto prohibition. It is growing because some people think it is easier than being in the drug trade because the penalties are lower, but the profits are the same or better."

Wisconsin's tax has increased from 77 cents per pack to $2.52. In Lake County, Ill., just across the state line from Kenosha, the tax rate is $1.98. In Chicago, which has the nation's highest cigarette taxes, the tax is $6.16 per pack. Iowa's tax rate is $1.36. Michigan's is $2. Minnesota's is $2.83.

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