Cigarette taxes only encourage smuggling from other places thus stability of such taxes is low
Hoffer ‘23( Adam/ director of excise tax policy at the tax foundation/ 05-23-2023/ The Tax foundation/How stable is cigarette tax revenue/ https://taxfoundation.org/cigarette-tax-revenue-tool/ /MP/ 6-30-23)
The second reason is that in many states, when cigarette tax rates are increased sizably above neighboring states, consumers are more inclined to buy cigarettes elsewhere. Cigarette smugglers are known to buy cigarettes in low-tax jurisdictions to resell them illegally in high-tax jurisdictions, maintaining a competitive advantage over the legal market by not collecting the excise tax. Cigarette smuggling is especially prominent in New York, where the tax is $4.35 per pack (with an add-on tax in New York City). Approximately of cigarettes sold in New York are smuggled in from another location, with states like California, Washington, New Mexico, and Minnesota falling not far behind. This cross-border effect considerably reduces the productivity (from a revenue standpoint) of cigarette taxes over time.
Because cigarette tax revenue is so unstable, policymakers and taxpayers should be skeptical of proposals to tie cigarette tax increases to the funding of , as collections are likely to decline over time.