The Intended and Unintended Consequences of a Legal Measure to Cut the Flow of Illegal Cigarettes Into New York City: The Case of the South Bronx

Objectives. We examined the impact of a change in New York tax law on the numbers of untaxed cigarettes bootlegged from Native American reservations and resold in the South Bronx.Methods. Discarded cigarette packs were systematically collected in 30 randomized South Bronx census tracks before and after the amended tax law went into effect in 2011. Also, administrative data were gathered on the number of taxed cigarettes sold in New York State, including sales to Native American reservations.Results. Before the tax amendment, 42% of discarded cigarette packs collected in the South Bronx had no tax stamp. After the tax law went into effect, the percentage of cigarette packs without tax stamps declined to 6.2%. Simultaneously, the percentage of packs with out-of-state tax stamps rose from 18.3% to 66.3%. The percentage of packs with a combined New York State and New York City tax stamp did not change after the tax amendment.Conclusions. After the tax amendment, the supply of contraband cigarettes appears to have quickly shifted from one lower-priced jurisdiction to another without a change in the overall prevalence of contraband cigarettes.In June 2010, as part of an emergency budget measure, New York State raised its cigarette tax from $2.75 to $4.35 per pack and, in an effort to prevent smokers from circumventing state cigarette taxes, amended its tax law so that Native American reservations would no longer be able to sell untaxed cigarettes to non–tribal members. Since the 1980s, Native American reservations within New York State have imported billions of premium brand cigarettes, reselling them directly to smokers or to bootleggers who in turn supplied a thriving black market, particularly in New York City. This constituted a considerable challenge to smoking cessation policies that relied on high cigarette taxes as an economic disincentive for smokers. After a legal battle between several Native American tribes and the governor of New York, the tax amendment went into effect in June 2011.Our goal was to assess the effects of this tax amendment on the illegal cigarette market in economically disadvantaged neighborhoods in New York City, taking the South Bronx as an example. Specifically, we examined whether the measure has been successful in cutting off the supply of untaxed cigarettes from Native American reservations and whether it resulted in a reduction in the overall prevalence of illegal cigarettes, thus preventing a displacement to other sources of illegal cigarettes in response to increased cigarette taxes.