TIME consumer goods

This Is About to Become Your Favorite New Drink

Chris Stein—Getty Images

Interest in premium brands is on the rise

Bacardi is jumping onto the bourbon bandwagon with its acquisition of a premium Kentucky distiller. But the bandwagon it has been riding since 1862 is picking up speed itself: Even as volume sales of rum are expected to decline, dollar sales are expected to grow, according to a new report, thanks mainly to rising interest in premium brands.

Bacardi on Monday announced it would acquire the maker of Angel’s Envy bourbon, giving the fourth-largest spirits maker its first foothold on the bourgeoning American bourbon market. The brand is owned by Angel’s Share Brands and Louisville Distilling Co. Its flagship port-finished bourbon is among the fastest-growing brands in a market that has seen eye-popping growth: total bourbon sales have increased 35% in the United States over the past five years, and 50% worldwide.

Bacardi is late to the party. It owns the staid, mainstream Dewar’s Scotch, and some whisky-based liqueurs, but until now has had no bourbon brands or any American whiskeys of any kind. But the bourbon trend doesn’t seem to be abating, and though Angel’s Envy is expected to move just 65,000 cases this year (not bad for a company launched in 2011), the company is building a new distillery in Louisville to be completed in 2016. That will take capacity to 800,000 cases.

Meanwhile, rum might be the new bourbon, as drinkers worldwide continue to seek out higher-end hooch. While total volume is expected to fall by about 1.7% between this year and 2014, most of that shrinkage will be at the low end of the market, according to a new report from just-drinks/IWSR Insights. Leaving the cheap stuff out of the equation, volumes will increase by more than 5.5 million cases, to 64.5 million, all of it premium priced.

Just as with premium and small-batch bourbons, “aspirational drinkers” are driving these trends. Rum has been somewhat late to the game because it has had to overcome its image as the booze of frat-boy party monsters and Jimmy Buffett fans. But the industry, most definitely including Bacardi itself, has been working to change that image through — and this is a word uttered entirely seriously by industry people — “premiumization.” Bacardi in 2013 vowed to “premiumitize” the whole rum category, with particular attention to premium brands as well as flavored varieties and spiced rums, all of which have seen sales take off over the past couple of years.

Not that rum will necessarily displace bourbon and other craft whiskeys in terms of cultural cachet. But drinkers are bolting for the high end across all categories. Still, rum has its work cut out for it. In 2014, Ed Pilkington, head of global marketing for Diageo’s vodka, rum, and gin brands, declared that rum had “lost its soul,” and had “fallen behind,” thanks to those aforementioned frat boys.

At the same time, rum was taking off in Europe, even as sales were slowing just about everywhere else. Those trends, according to the new report, are now spreading elsewhere, thanks in part to introductions of products like Bacardi’s high-end Gran Reserva Maestro de Ron, as well as flavored rum’s like its Bacardi Mango Fusion.

TIME Retail

Amazon Basically Just Unveiled the Future of Shopping and It’s Awesome

No, the Dash Button is not an April Fool

Amazon.com unveiled its latest innovation Tuesday — a tiny device that allows you to order household items at the touch of a button.

The Dash Button is a Wi-Fi enabled plastic controller that connects to a customer’s smartphone through the Amazon app. The buttons can be stuck or hung anywhere around the house — like on your washing machine, say. If you run out of detergent, you just push the button and an order is automatically sent to Amazon for that particular product.

More than a dozen brands — listing about 255 of the kind of bulky products you need to replenish often — are available to order through the Dash Button program.

The device allows users to cancel their order within 30 minutes, and the order will only process once, so you won’t end up with tons of detergent being delivered to your door.

The timing of Amazon’s announcement has got many people wondering if it’s a prank for April Fool’s Day. Others see the timing as a stroke of marketing genius, because while people are trying to decide if it’s a hoax they are also doing precisely what Amazon wants them to do — which is talk about Dash and share the news.

Amazon spokesperson Kinley Pearsall confirmed to the Los Angeles Times that the Dash Button is indeed real, although for now the service is only available to Amazon Prime customers by invitation only.

Read next: 7 Things You Probably Had No Idea Amazon Sold

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TIME Companies

Toys ‘R’ Us Wants to Make Its Stores More Fun For, Well, the Kids

The Toys R Us Inc. logo is displayed inside a store ahead of Black Friday in New York, U.S., on Thursday, Nov. 27, 2014
Peter Foley—Bloomberg/Getty Images The Toys R Us Inc. logo is displayed inside a store ahead of Black Friday in New York, U.S., on Thursday, Nov. 27, 2014

Makes sense

In effort to contend with online retailers and discount box stores, Toys ‘R’ Us is planning an overhaul aimed at making its stores more appealing for its core market: children.

Bloomberg reports the company will start with a prototype store in New York this year that will feature interactive technology and — why didn’t they think of this before? —a play area. If the kids are enjoying themselves, the thinking goes, parents will spend more time, and money, in the store.

“It has to be something where kids want to go and play,” CEO Antonio Urceley said on Tuesday, “We have to reinforce that we are a specialist.”

Toys ‘R’ Us is struggling to compete with retailers like Amazon.com and Target, which undercut the toy brand on price. The company hopes that souped up stores will make up for that.

Additionally, the company plans to hire more staff at Babies ‘R’ Us to boost customer service that it admits has been slacking.

The struggles of Toys ‘R’ Us are not new. In 2005, it became a jointly held private corporation owned by Bain Capital Inc., KKR & Co. and Vornado Realty Trust. Since then, it has failed to garner momentum for an initial public offering with the last attempt in 2013 failing due to “unfavorable market conditions.”


MONEY Shopping

Why Target Just Gave You a Year to Return Stuff

Exterior of Target store
Richard Clement—ZUMA Press, Inc./Alamy

Target's newly generous return policy goes against industry trends, and it's inevitable that some shoppers will go overboard and abuse it. What is the company thinking?

Last week, Target announced it was extending the return policy on a wide range of merchandise to 365 days, a huge increase compared with the old 90-day return allowance.

The new policy doesn’t apply to all goods purchased at Target. Instead, the one-year window is valid on all 32 Target “owned and exclusive brands”—the stuff you can buy only at Target—including merchandise sold under names such as Archer Foods, C9 Champion, Cherokee, Liz Lange, Mossimo, Nate Berkus, Shaun White, and Wine Cube. The return policy for all items purchased as part of a Target gift registry (for babies, weddings, and such) has also been extended from 90 days to 365 days. And the liberal return period allowance for registry items commences on the day of the event, not the date of purchase.

While certainly more generous compared with most of its competitors, Target’s new return policy is not completely unheard of. “It’s a bit reminiscent of Costco’s liberal return policy,” Edgar Dworsky, a consumer advocate and the founder of Consumerworld.org, which publishes an annual retailer return policy report, said to the Minneapolis Star Tribune. “It certainly is an unusual move.”

Unusual indeed. During the same week that Target was rolling out its easier-than-ever return policy, Bed Bath & Beyond was following industry trends by making its policy less customer-friendly. As Consumerist.com noted, in the past Bed Bath & Beyond allowed all items purchased at the store to be returned for store credit or a direct exchange indefinitely, with or without a receipt—a “policy that most customers enjoyed and a few abused.” Now, however, when customers bring back items without a receipt, they’ll still be able to get store credit, but there will be a 20% deduction on the amount they receive.

[UPDATE/CORRECTION: Bed Bath & Beyond reached out to us to clarify that its new return policy takes effect on April 20, 2015, and that it “will only affect customers whose purchase cannot be located to process a return, either because the receipt was not provided or because we could not identify the purchase through a query of our transaction records.”]

In recent years, other retailers once renowned for incredibly generous return policies have felt forced to tighten up restrictions due to the abuse by a small percentage of customers. For instance, Bloomingdale’s and REI have ratcheted up return policies, partly because of the extreme behavior of a few rotten shoppers. Some people had the gall to return counterfeit goods purchased on the black market overseas to REI, while others referred to the retailer as “Rental Equipment Inc.” because they used backpacks, tents, and other gear for years and turned them in for new models once they were worn out.

Retailers say they’ve also been compelled to tweak return policies because of a certain subspecies of “returnaholic” shoppers known for engaging in the practice of “wardrobing.” This is the name when you buy something—typically clothing or accessories—wear it to some special event while hiding the fact that the price tag is still attached, and then return it afterward.

At a discussion of Target’s new return policy over at the industry publication Retail Wire, one retail insider noted that the company was all but asking for “wardrobing” and other kinds of abuse to take place:

I expect Target will get flooded with returns as a result of this policy—especially by Millennials who want to rent rather than own. Upscale retailers have had to limit the returns of expensive dresses because women would wear them for one night and return them using the store’s liberal return policy.

So what’s behind Target’s change to a more flexible, potentially abused return policy? The short answer is that shoppers buy more stuff when they know returns are easy.

“People are more likely to purchase impulsively with the assurance of a liberal return policy,” says consumer psychologist Kit Yarrow, author of Decoding the New Consumer Mind and a frequent contributor to Money.com. “In stores like Target, impulse purchases are essential to their financial health.”

In the past, Yarrow has explained that a good return policy is critical when a retailer is trying to foster a long-lasting, trusting relationship with the customer. “Psychologically, a liberal return policy unconsciously communicates confidence in the products being sold,” she says. “With trust in businesses at abysmal levels, this is key.”

It’s been a long time since Target was known as “Tarjhay,” the “cheap chic” darling of the industry. By pushing the return policy to new levels of flexibility and generosity, Target is also pushing its reputation upscale. “Better return policies will help to elevate and classy-up the brand image–which is now more on par with Walmart whereas once it was edging up toward Macy’s,” says Yarrow.

Yarrow also points out that the retail experience today is riddled with potential headaches, so one easy way to set your company apart from the pack is by removing annoyances. “Retailers are typically focused on adding positives–what consumers really want is fewer negatives,” she says. “Hassle reduction is the new route to consumer happiness.”

TIME Retail

Target Will Pay $10 Million to Settle Data Breach Lawsuit

Individual victims will be paid up to $10,000 in damages

Target Corp has agreed to pay $10 million in a proposed settlement of a class-action lawsuit related to a huge 2013 data breach that consumers say compromised their personal financial information, court documents show.

Under the proposal, which requires federal court approval, Target will deposit the settlement amount into an interest bearing escrow account, to pay individual victims up to $10,000 in damages.

The claims will be submitted and processed primarily online through a dedicated website, according to the court documents.

The proposal also requires Target to adopt and implement data security measures such as appointing a chief information security officer and maintaining a written information security program.


This article originally appeared on Fortune.com

TIME Consumers

This Is the Drink People Are Getting Instead of Coffee

Man on desk holding cup of coffee, close up
Getty Images

Consumption of coffee is declining

Coffee remains by far the most popular caffeine-delivery mechanism in the United States, but tea is making serious headway against its beverage rival, especially among young people.

The National Coffee Association reported Tuesday in its annual survey that coffee consumption overall slipped a bit over the past year. Last year, 61% of respondents said they drank at least one cup of coffee per day. This year, that number is 59%. It’s clearly a trend: the number was 63% in 2013’s survey.

Meanwhile, tea consumption continues to grow, with the total wholesale value of tea sold in the United States reaching $10 billion last year, up fivefold from 1990. The demographic breakdown is stark: a survey by YouGov last month found that among people over 65, 70% prefer coffee to tea. Among people 18 to 29, meanwhile, the two drinks are about even.

Some observers are guessing that the trend toward healthier options, especially among young people, is driving people to tea. There might be some truth to that, given that tea very generally contains less caffeine than coffee, and is largely perceived as the healthier option. But several studies in recent years have indicated that coffee might be much healthier than previously thought — not only not as bad for us as we thought, but actually good for us.

It’s possible to make too much of this trend. The Coffee Association survey points out that more than three-quarters of Americans still drink coffee at least sometimes, and coffee is still wildly popular in general. One indicator: the rising popularity of one-cup coffee machines (like those made by Keurig Green Mountain), which are now owned by more than a quarter of Americans.

Still, ebbing demand is troubling for the coffee growers, where wholesale prices, after a spike last year, have been trending downward. In February, the wholesale price for arabica beans fell by 5.8% from the previous month, part of a downward trend that began in October.

Read next: 7 Reasons to Have a Cup of Green Tea

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TIME Retail

IKEA: Please Stop Playing Hide-and-Seek in Our Stores

An Ikea store in Montpellier, southern France on March 27, 2013.
Pascal Guyot—AFP/Getty Images An Ikea store in Montpellier, southern France on March 27, 2013.

32,000 people signed up to play an in-store game

IKEA is a pretty fun place. But the Swedish furniture store — known for meatballs, ball pits and unpronounceable dressers — has taken a stand against irreverence by banning massive games of hide-and-seek in its Dutch stores, Bloomberg reports.

And by massive, we mean 32,ooo people signed up for a Facebook event in Eindhoven; 19,000 in Amsterdam; and 12,000 in Utrecht.

“It’s hard to control,” IKEA Group spokeswoman Martina Smedberg told Bloomberg. “We need to make sure people are safe in our stores and that’s hard to do if we don’t even know where they are.”

Last summer, hundreds played the game in Belgian IKEA locations.

And just look at how much fun they were having:


Read next: Ground Zero in the Clutter Wars: My House

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TIME Retail

People Are Buying More Fancy Toilet Paper Than Ever

And that could be a good sign for the economy

You may not be able to poop gold, but at least you can wipe with luxe toilet paper.

Luxury toilet paper sales reached $1.4 billion last year, outselling regular toilet paper for the first time in 10 years, reports the Washington Post, citing data from market research company Euromonitor International. Luxury toilet paper sales have grown more than 70% since 2000, and are expected to grow another 9% over the next five years.

Analysts say that while luxury toilet paper (the cushy, quilted, scented varieties) is more expensive than regular toilet paper, it doesn’t break the bank for most consumers—which means it’s a small luxury many Americans feel they can afford.

That’s why some experts say luxury toilet paper sales may even be a sign of economic strength. The last times the luxury brands outsold generic toilet paper were in 2005 and 2000, both boom years for consumer spending.

[Washington Post]

TIME Retail

Why the Supplements Industry Is So Powerful

It's not because it takes its vitamins

After tanking on Tuesday, the stocks of supplements retailers GNC Holdings and The Vitamin Shoppe recovered somewhat on Wednesday. Thanks to a federal law that protects the industry, there’s only so much law enforcement can do about a business that, on one hand, is widely characterized as dicey and, on the other hand, reports $5 billion in sales a year.

New York Attorney General Eric Schneiderman on Tuesday announced that his office is leading a coalition of state attorneys general to widen his examination of the industry with the goal to “enhance transparency” and ensure that the products actually contain what their labels claim to contain, and nothing more.

The coalition includes the attorneys general of three states—New York, Connecticut, and Indiana—along with Puerto Rico.

In February, Schneiderman announced that tests solicited by his office determined that nearly four in every five herbal supplements tested at major retailers in New York didn’t contain the ingredients stated on the label. And more than a third of them contained “contaminants” such as rice, pine, beans, and asparagus. Schneiderman’s office said the supplements were purchased at GNC, Target, Wal-Mart, Walgreen’s. Schneiderman ordered those retailers to stop selling some store-brand supplements, including ginseng, St. John’s Wort, Echinacea and garlic, and requested information from the companies about how those products are processed.

The Council for Responsible Nutrition—a lobbying group whose members are makers of supplements—claimed the tests used were not accurate. GNC said its own testing, along with what it claimed was an independent, third-party test, “confirm in no uncertain terms that our products are safe, pure, properly labeled and in full compliance with all regulatory requirements.” Wal-Mart, meanwhile, insisted that the products it removed from shelves “contain accurately labeled ingredients and are safe.”

The Herbal Plus brand products named in Schneiderman’s letter will be back on the shelves soon, GNC promised.

The federal government doesn’t have much power over the supplements industry thanks to a 1994 law, the Dietary Supplement Health and Education Act, which prevents the products from the scrutiny and approval given to other drugs. “I could pretty much create something this afternoon in my kitchen and sell it and not have to do any kind of testing ahead of time,” author Catherine Price told TIME last month. Price is the author of Vitamania, a new book about the supplements and vitamins industries.

The chief sponsor of the 1994 is Utah Sen. Orrin Hatch, whose state is home to the headquarters of many marketers of supplements, who also happen to be major campaign donors. He continues to boast of his sponsorship of that law, and claims that supplements help keep him spry at age 77.

Despite the industry’s worries about a new assault on their business practices, it’s not clear, given the protections the industry enjoys whether much will be done to crimp sales in the long term. Changing labels or ensuring that labels match the actual ingredients might be all the industry has to do to call off the dogs. But it’s still perfectly legal, for example, to sell St. John’s Wort, which is widely believed to relieve symptoms of depression despite a lack of science backing up that notion. The label on GNC’s Herbal Plus St. John’s Wort claims the product “promotes positive mood balance.”

The FDA has a pretty good guide to the regulation (or lack thereof) of dietary supplements.

Read next: A New Treatment for Migraines Is Showing Promising Results

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TIME Retail

These Are the States Smoking the Most Smuggled Cigarettes

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Great variation of cigarette taxes between states creates net inflows of smuggled cigarettes for some, while others report net outflows

Tobacco consumption in America has declined consistently since the surgeon general’s office published its first report in 1965. However, more than 18% of adults still identified as smokers in 2013, and in many states, demand for tobacco is high enough to justify large-scale smuggling operations. In New York, a nation-leading 58% of the cigarette market was smuggled in 2013. The share is so high that it hardly fits the description of an underground market.

Cigarette taxes vary greatly between states, and therefore, so do cigarette prices. According to the recent Tax Foundation report, “Cigarette Taxes and Cigarette Smuggling by State, 2013,” this creates arbitrage opportunities for smugglers — that is, the profiting from asset price differences. As a result, some states have net inflows of smuggled cigarettes, while others report net outflows. Based on smuggled cigarettes consumed as a percentage of total cigarettes consumed in 2013, these are the states with the highest cigarette smuggling rates.

Click here to see the states smoking the most smuggled cigarettes

Smuggling can take a variety of forms, from casual smuggling, when individuals purchase cigarettes at a discount across state lines for personal consumption, to commercial smuggling, which could mean large-scale criminal organizations. The severity of these crimes varies considerably, and depending on state regulations, many acts of smuggling go completely unnoticed. For our purposes, cigarette smuggling is defined broadly as an avoidance of cigarette taxes.

A state’s cigarette tax is the largest contributor to the smuggling rate. The tax rate on cigarettes in all but two of the nine states where smuggling is most common exceeded the national average rate of $1.44 per pack. In New York, the tax rate is $4.35 per pack, the highest in the nation. Neighboring Vermont, Pennsylvania, as well as nearby New Hampshire, all had much lower tax rates, as well as net outflows of contraband tobacco.

In an interview with 24/7 Wall St., Scott Drenkard, economist and manager of state projects at the Tax Foundation, as well as the author of the Tax Foundation’s report, explained that in states that have much higher taxes than other states, and not very much separation geographically, the likelihood of smuggling increases dramatically. The problem, according to Drenkard, “is that we have a price prohibition on these products because we’ve taxed them at such high rates in some states.” As in the 1920s, “when you have prohibition you’re going to have bootlegging [and] you’re going to have arbitrage,” Drenkard said. “You have the same economic engines at work that create these black markets.”

In addition to the high tax rate variance between states, there is the added opportunity for smugglers to buy cigarettes in Indian reservations where tobacco is often far less expensive. New York, New Mexico, Arizona, Wisconsin, and Washington are all near Indian reservations that likely influence the smuggling rate considerably.

While smuggling cigarettes was extremely lucrative for many smugglers, large-scale or small, smoking cigarettes was relatively uncommon in all of these states. The percentage of adults who identified as smokers in 2013 exceeded the national smoking rate of 18.2% in only two of the nine states reviewed. According to Drenkard, many states have increased excise taxes in order to generate revenue and bolster failing budgets. State reserves as a percent of general fund expenditures in fiscal 2014 — also known as a rainy-day fund — did not exceed the average for the nation in seven of the nine states with the highest smuggling rates.

For Drenkard, levying such so-called “sin taxes” is extremely problematic. For one, “it makes long-term planning for your budget very difficult, [especially] if you have such a large portion of your revenue coming from an activity that you’re actively trying to discourage.” Many of these states have generated relatively large shares of revenue from a tobacco tax. In 2012, state and local tax revenues accounted for at least 2.5% of total revenue in five of the nine states. By contrast, the national average tobacco tax contribution to revenue was 2.2%.

To identify the states smuggling the most cigarettes, 24/7 Wall St. reviewed smuggled cigarettes consumed as a percent of total cigarettes consumed in 2013 from the Tax Foundation’s February 2015 report, “Cigarette Taxes and Cigarette Smuggling by State, 2013.” Only states with smuggling rates greater than 25% were considered. For the Tax Foundation, a positive percentage is a measure of inflow, while a negative percentage indicates an outflow of smuggled cigarettes. Tax rates, smuggling rates from 2006, and percentage point change data also came from the Tax Foundation. Local tax rates, state and local tax revenue figures, and tax burdens are from the Tax Policy Center and are as of the most recent period available. The percent of adults who smoked in 2013 is from the Kaiser Foundation. Rainy-day funds, or reserves as a percentage of general fund expenditures in fiscal year 2014 were provided by Pew Charitable Trusts.

These are the states selling the most contraband cigarettes.

9. Utah
> 2013 consumption smuggled: 27.3%
> 2013 cigarette tax rate: $1.70 (14th highest)
> Smoking rate: 10.3% (the lowest)
> Pct. point change smuggling rate (2006-2013): 14.5 (6th highest)

More than 27% of all cigarettes consumed in Utah in 2013 were smuggled into the state, the ninth highest percentage among all states. The share of smuggled cigarettes consumed has also risen by 14.5 percentage points since 2006, the sixth largest surge nationwide. The increase is largely due to the state’s cigarette tax of $1.70 per pack, which was not only one of the highest such tax rates in 2013, but it had also increased 145% since 2006 — also one of the largest tax rate changes. As in many other states where smuggling cigarettes is common, criminals often buy cigarettes at a discounted price in nearby states and resell them in Utah. Neighboring Idaho, Nevada, and Wyoming, where cigarettes are taxed at less than $1.00 per pack, all reported net outflows of smuggled cigarettes. The high cost of tobacco may also have helped discourage smoking altogether. Roughly one in 10 Utah adults were smokers in 2013, the lowest smoking rate compared to other states.

ALSO READ: The Cities Where No One Wants to Drive

8. Texas
> 2013 consumption smuggled: 27.4%
> 2013 cigarette tax rate: $1.41 (22nd highest)
> Smoking rate: 15.9% (5th lowest)
> Pct. point change smuggling rate (2006-2013): 12.6 (8th highest)

While the cigarette tax rate of $1.41 per pack in Texas was slightly lower than the national average rate of $1.44 per pack, the tax rate rose 244% between 2006 and 2013, the third highest increase nationwide. The spike may be especially shocking to Texas residents, who are perhaps more accustomed to relatively low taxes. Texas residents paid just 7.5% of their average personal income in state and local taxes in 2011, nearly the lowest nationwide. Tobacco smuggling is on the rise. More than 27% of all cigarettes consumed in the state were smuggled in 2013, up nearly 13 percentage points from 2006, a larger increase than in all but a handful of states. While Texas’ smuggling rate was among the highest in the country, the smoking rate was not especially high. Less than 16% of Texas adults smoked in 2013, one of the lowest smoking rates in the country.

7. Wisconsin
> 2013 consumption smuggled: 31.2%
> 2013 cigarette tax rate: $2.52 (7th highest)
> Smoking rate: 18.7% (21st lowest)
> Pct. point change smuggling rate (2006-2013): 18.1 (3rd highest)

Cheaper cigarettes in comparatively low tobacco tax states are within reach of Wisconsin residents and businesses. Indiana and Missouri, for example, which both reported net outflows of smuggled cigarettes, and have lower tax rates, are less than a day’s drive from Wisconsin. With a 2013 cigarette tax rate of $2.52 per pack — the seventh highest rate nationwide — many people in Wisconsin likely purchase tobacco elsewhere. In 2013, more than 31% of all cigarettes consumed in Wisconsin were smuggled into the state, also the seventh highest share compared with all states. Despite the smuggling problem, however, Wisconsin’s tax revenue from tobacco grew by 115.8% between 2002 and 2012, higher than the national growth rate of 93.6%. By 2012, tobacco tax revenue accounted for more than 4% of total state revenue, the third highest proportion nationwide.

6. California
> 2013 consumption smuggled: 31.5%
> 2013 cigarette tax rate: $0.87 (18th lowest)
> Smoking rate: 12.5% (2nd lowest)
> Pct. point change smuggling rate (2006-2013): -3.1 (23rd highest)

The high frequency of cigarette smuggling did not prevent local and state tobacco tax revenues from growing substantially in most other states. California’s revenue from tobacco taxes shrank by nearly 19% between 2002 and 2012, however, nearly the largest decrease in the nation. The state’s exceptionally low cigarette tax rate of $0.87 per pack in 2013 — unchanged from 2006 — likely accounts in part for the decline in revenue. The state’s nation-leading sales tax of 7.5% is likely a greater factor contributing to smuggling opportunities. More than 31% of all cigarettes consumed in California were smuggled in 2013, the sixth highest share nationwide. Yet, Californians are among the the least likely to pick up smoking, with 12.5% of adults reporting a smoking habit, nearly the lowest smoking rate.

ALSO READ: Cities Where Crime is Plummeting

5. Rhode Island
> 2013 consumption smuggled: 32.0%
> 2013 cigarette tax rate: $3.50 (2nd highest)
> Smoking rate: 17.4% (16th lowest)
> Pct. point change smuggling rate (2006-2013): -11.2 (6th lowest)

In 2006, more than 43% of all cigarettes consumed in Rhode Island were smuggled into the state, the highest share nationwide at that time. By 2013, smuggling had become less common, dropping by 11.2 percentage points, one of the larger drops in the nation. The state’s cigarette tax increased by 42% over that period as well, to $3.50 per pack, the second highest such tax rate in the country. Rhode Island adults were less likely to be smokers than most Americans. Yet, 4.6% of the state’s total revenue in 2012 came from tobacco taxes, the second highest share in the country and more than double the national tobacco tax contribution of 2.2%. Smuggling cigarettes is perhaps further encouraged by Rhode Island’s sales tax rate, which at 7.0% at the beginning of 2014 was second only to California. The proximity of New Hampshire, which reported the largest net outflow of smuggled cigarettes nationwide, and does not have a sales tax, likely presents even more opportunities to bootleg tobacco.

For the rest of the list, please go to 24/7WallStreet.com.

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