Cigarette Smuggling in California Overstated, New Study Says
New UCSF Study Sharply Differs from State Board of Equalization Estimated Revenue Losses
Propose Legislative Hearing to Address Impact of Cigarette Smuggling

(July 29, 2003) — On the heels of a nearly-approved state budget, a new study from the University of California at San Francisco Center for Tobacco Control Research and Education reports that cigarette smuggling in California amounts to $7 to $45 million a year, far below the state Board of Equalization’s (BOE) estimate of $288 million in annual cigarette excise tax losses. This number estimates a rate of smuggling at between 1 to 4.2% of the entire state’s cigarette tax revenue collection of $1.1 billion.

In contrast, the BOE, this year, published a report claiming that as much as 27% of cigarettes have been smuggled into the state. The BOE’s estimation is five to ten times higher than what other authorities, including UCSF, have analyzed.

These findings are timely considering the attempt to pass AB 71 (J. Horton, D-Inglewood), which would create a new statewide tobacco licensing program to reduce cigarette smuggling and tobacco tax evasion. While the American Heart Association, American Lung Association, and American Cancer Society support the close monitoring of cigarette sales and reducing smuggling, AB 71 fails to condition a tobacco retailer’s license on violations of state law making it illegal to sell minors tobacco products. We also disagree with a one-time fee versus an annual re-licensing and thus an annual revenue source. The three agencies oppose AB71 unless amended to address these critical issues.

The American Heart Association, American Lung Association and American Cancer Society believe further understanding of cigarette smuggling’s impact on California’s revenue stream is needed and supports a legislative hearing on this issue.

For the full study, visit http://repositories.cdlib.org/ctcre/tcpmus/Smuggling2003

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