Cigarette Tax Avoidance in the Chicago Area: A Contribution to the Litterature
The large tax differentials between Chicago and neighboring jurisdictions provide an incentive for smokers to buy cigarettes outside Chicago. By examining a random sample of discarded cigarette packs, I can see whether Chicago taxes have been paid on the cigarettes consumed in Chicago. I find a startling amount of tax avoidance: three-quarters of the packs found on the streets of Chicago did not display a Chicago tax stamp. Demonstrating that the cost of tax avoidance influences behavior in the predicted direction, the percentage of packs without a Chicago tax stamp fell as distance to lowertax borders increased.
