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From Moonshine to Marlboros: Indiana Revives Its Bootlegging Past
Indiana’s recent surge in cigarette taxes isn’t just a budgetary move but a revival of old-school bootlegging spirit. As the state boosts its per-pack cost, lawmakers are rolling out stiff new penalties aimed at stopping smugglers in their tracks, an echo of the Prohibition-era raids on moonshiners and racketeers.
It’s like we’re back in the ‘30s in many ways, with historical records recounting mid‑1930s operations shutting down illicit bootleg beer and tobacco rings. Today, the focus has shifted from hidden stills to interstate roads and shopping malls, where bargain-seeking smokers dodge taxes by driving to cheaper states or cashing in on bulk deals.
Kentucky and Tennessee offer cautionary tales. Kentucky’s ultra-low cigarette tax—just 10 cents per pack compared to Indiana’s $1—has long made it a red‑hot export hub, with smuggling routes stretching across multiple state lines. Tennessee, meanwhile, saw an uptick in bootleg cigarette dens near its borders after hiking taxes in the 2000s, mirroring classic “beer flats” but for smokes.
Yet the real story is nuanced. A January 2018 brief by Johns Hopkins Bloomberg School of Public Health’s Tobacconomics program examined the impact of states—including Indiana—raising cigarette taxes by 50 cents or more. Following Indiana’s 2007 hike from 55¢ to 99.5¢ per pack, revenues surged 43% in the next 12 months, even as neighboring states saw modest drops, evidence that higher taxes raised net revenue despite smuggling concerns
It’s a throwback with a 21st‑century twist, with Indiana chasing down smokes the way it once tracked down stills.
Enforcement Overhaul: What’s in the New Law?
Starting July 1, Indiana’s cigarette tax more than doubles, and the law adds strong enforcement tools:
Criminalizing bulk out‑of‑state purchases, turning high-volume tamponers into felonies.
Enhanced task forces—including Excise and state police—monitoring shipments at toll booths and warehouses.
Surprise audits of wholesalers and retailers to intercept fake tax stamps.
Expected revenue impact: $290 million annually, earmarked for public health programs.
Cross-Border Temptations (and Cracks in the System)
The challenge, of course, is enforcement. Indeed, Indiana’s proximity to low-tax states like Kentucky makes it ripe for illicit trade. A report by the Tax Foundation ranked Indiana among the top 10 states likely to face cigarette smuggling surges post-tax hikes, citing a “high likelihood of consumer evasion via border hopping and gray-market sales.”
Ohio, with a relatively low cigarette tax and dense highway network, is another state to watch. According to a 2024 Mackinac Center study, nearly 12% of cigarettes smoked in Indiana could originate from out-of-state purchases in the first year after the hike.
State Playbooks: Illinois & New York
Illinois:
Illinois recently boosted its nicotine-product taxes to 45% of wholesale, elevating the risk of smuggling.
Nearly 30% of cigarettes consumed there are estimated to be smuggled across state lines.
The state enforces stiff penalties against unstamped packs—$20–$25 per package above nine—and began targeting high-volume shipments after its 2019 tax increase ($1 jump per pack) led to a spike in contraband (turn0news28, turn0search16).
New York:
With one of the nation’s highest combined taxes (state + NYC), New York has seen smuggling rates over 50%, hitting a peak of 61% during its latest $1-a-pack hike.
The Albany-based Bureau of Alcohol, Tobacco & Firearms and the state’s Tax Enforcement Office enforce felony-level trafficking laws (Class D/E felonies for 10,000+ cigarettes)
A History of Hoosier Hustles
Bootlegging is practically baked into Indiana’s economic DNA. During Prohibition, Indiana was home to some of the most active moonshine rings in the Midwest, particularly in rural Southern Indiana counties like Lawrence, Dubois, and Orange. Moonshine was often ferried under cover of darkness down what locals nicknamed “Whiskey Roads.”
Now, the medium has changed—packs instead of pints—but the method remains strikingly similar: find a gap in the law, exploit the geography, and move product without detection.
Even former Indiana Excise officer John Halverson acknowledged the parallel: “Back then, it was stills in barns. Now it’s cartons in car trunks.”
Public Health Victory or Policy Gamble?
Not everyone sees the smuggling surge as a policy failure. Public health advocates argue that even if some smokers dodge the tax, higher prices overall lead to real reductions in smoking, especially among teens and low-income groups.
Mike Seilback, the National Assistant Vice President for Advocacy at the American Lung Association, told The Indiana Capital Chronicle,
“Higher tobacco prices are the single most effective way to reduce smoking, period. We expect thousands of Hoosiers to quit, and thousands more young people never to start.”
Even with smuggling levels as high as 10–30%, research shows states can still see significant net revenue gains after tax hikes—as long as enforcement is robust. Indiana’s own experience in 2007—a 41% drop in sales but a 43% rise in revenue—illustrates this dynamic.
Will the Strategy Work?
Indiana is betting big that it will. But the outcome hinges on more than just revenue projections. Can the state strike a balance between deterrence and enforcement? Will small-town retailers adapt? And will the new bootleggers—modern-day moonshine runners in SUVs and rental vans—stay one step ahead?
Time will tell. But for now, the spirit of the 1930sis alive and well on the backroads of the Midwest. The stakes are higher, the vehicles faster, and the tax stamps harder to fake—but the game? It’s as old as Indiana itself.
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