In 1977, at the request of the federal government, a report on the problem of cigarette smuggling was drawn up by the Advisory Commission on Intergovernmental Relations, an independent federal agency established to study challenges faced by multiple levels of government. The ACIR report, titled "Cigarette Bootlegging: A State and Federal Responsibility," stated that cigarette smuggling in the United States was primarily due to state tax differentials[76] and recommended, among other things, that governments exercise restraint with their cigarette tax rates.[77] The report is one of the most oft-cited studies of cigarette taxes and smuggling in the academic literature.
Because of the interstate nature of smuggling and because smuggling was not a federal crime, many in law enforcement believed states did not have the support they needed from federal enforcement agencies. To that end, the ACIR report also recommended a federal law to prohibit the transport of large quantities of cigarettes across state lines with the intent of evading state and local excise taxes.[78]
The report also discussed a more radical course of action the federal government could take: federalizing the cigarette tax. Under this proposal the federal government would increase its cigarette tax rate and distribute the revenue among the states, while the states would eliminate their cigarette taxes. That recommendation sometimes appears in modern scholarship, too. The ACIR's official recommendation was for governments to exercise a degree of restraint with regard to cigarette taxes.[79] The issue of cigarette smuggling was suddenly receiving attention from media outlets like The New York Times and the CBS television program "60 Minutes," and the group was hopeful about the chances for federal involvement.[80]
Congress responded by passing the Contraband Cigarette Act in 1978, which prohibits the transport, receipt, shipment, possession, distribution or purchase of more than 60,000 cigarettes not bearing the tax stamp of the state where the cigarettes are found (Michigan did not yet have a cigarette tax stamp). Possible punishments include prison, large fines and vehicle seizure.
[76] Cigarette Bootlegging: A State AND Federal Responsibility, (Washington, D.C.: Advisory Commission on Intergovernmental Relations, 1977), 1.
[77] Ibid., 5.
[78] Ibid.
[79] Ibid., 28.
[80] Ibid.