The $5 Man: The Underground Economic Response to a Large Cigarette Tax Increase in New York City

Abstract

Objectives. We examined the mechanisms by which living in a disadvantaged minority community influences smoking and illegal cigarette sale and purchasing behaviors after a large cigarette tax increase.

Methods. Data were collected from 14 focus groups (n=104) that were conducted during the spring of 2003 among Blacks aged 18 years and older living in New York City.

Results. A large tax increase led to what focus group participants described as a pervasive illegal cigarette market in a low-income minority community. Perceived pro-smoking community norms, a stressful social and economic environment, and the availability of illegal cigarettes worked together to reinforce smoking and undermine cessation.

Conclusions. Although interest in quitting was high, bootleggers created an environment in which reduced-price cigarettes were easier to access than cessation services. This activity continues to undermine the public health goals of the tax increase.

Raising cigarette prices is one of the most effective means of reducing tobacco use.1 In 2002, 16 states increased their cigarette taxes; New York State was among this group. In April 2002, the state increased the cigarette tax from $1.11 to $1.50 per pack. In July 2002, on top of this increase, New York City (NYC) increased its local excise tax from $.08 to $1.50. At $3.00, NYC has the second highest excise tax in the United States.2 Retail prices currently average $7.50–$8.00 per pack.

Data from the 2003 NYC Department of Health and Mental Hygiene’s Community Health Survey (CHS), a telephone-based survey of 10 000 NYC residents, indicated an unprecedented 11% decrease in smoking prevalence that corresponded with the tax increases. Smoking rates fell from 21.6% in 2002 to 19.2% in 2003. Further, the CHS found that Black individuals and low-income persons were more likely than White individuals and higher-income persons to report that the tax increase had some impact on their smoking (e.g., reduced amount smoked, tried to quit, or succeeded in quitting).3

However, immediately after the city and state cigarette tax increased, local newspapers reported a “flood” of cigarette smuggling into NYC and a rise in illegal street sales of untaxed cigarettes, particularly in low-income neighborhoods.4^,5 Popular brands, it was reported, could be bought on the streets from bootleggers for as little as $5.00 per pack. Moreover, the CHS showed an 89% increase in cigarettes purchased through alternative sales channels. The CHS did not directly ask smokers about cigarettes purchased illegally on the street, but the study did find that, of cigarettes purchased elsewhere, 29% were bought within New York State but outside NYC; 21.7% in a different state; 18.1% over the Internet; and 12.4% from another person.3 Purchases of untaxed cigarettes from another person were more common among Blacks compared with all other ethnic groups3 and were clustered in low-income neighborhoods (NYC Department of Health and Mental Hygiene, unpublished data, 2003).

Although smoking in the United States has declined, in part because of effective statewide tobacco control programs and polices, disparities in smoking prevalence by socioeconomic status appear to be widening.6^–11 Adults living below the poverty line have higher smoking rates (29.1% vs 20.6%) and are less likely to quit successfully compared with those living at or above the poverty line.7^,9^,10^,12 Explanations for these phenomena include stress associated with poverty and isolation, lower levels of education, and targeting of low-income neighborhoods by the tobacco industry.13^–15 Disparities in health behaviors may also result from material and social characteristics of the neighborhood environment that shape the social context of people’s lives, which perhaps diminishes the predicted effect of polices such as tax increases in ways that are poorly understood.14^,18^–22

Despite quantitative evidence of tax avoidance in response to cigarette tax increases3^,23^–26 and a recent survey that found support for cigarette taxes among Blacks,27 no studies have examined how living in a disadvantaged minority neighborhood shapes the impact of smoking policies on individual tobacco use. We responded to the gap in research on the differential consequences of tobacco policies in underserved neighborhoods28 by conducting the first study using qualitative analysis to examine these issues among a primarily Black population in the United States. We offer explanations for the mechanisms by which living in a disadvantaged community may influence smoking and illegal purchasing patterns after a tax increase.

METHODS

Research Design

The results of our study were based on data that were collected from focus groups conducted from March through May 2003 as part of a study funded by the Centers for Disease Control and Prevention and the American Legacy Foundation. We employed an ecological model and principles of community-based participatory research29 to investigate contextual factors associated with smoking and community capacity for tobacco control in Central Harlem in NYC. Harlem is a predominantly Black, low-income community that suffers from excess mortality attributable to a history of high smoking prevalence.30^–32 Focus groups have proven to be an effective method for investigating complex behaviors and can aid in identifying emerging issues for future research and intervention planning,33 all of which were critical for the larger study. The phenomenon of the “$5 man,” a new source of low-cost cigarettes, emerged in focus groups in response to questions regarding access to cigarettes and changes in access after the tax increase.

Sample Recruitment

A purposive sampling strategy was used to recruit Black residents of Harlem aged 18 years and older.34 Researchers employed a 2-pronged strategy of street and targeted recruitment, with members of the project’s community advisory board participating in the development of the sampling strategy. Street recruitment methods involved broadly covering the area through recruitment at community, senior, and unemployment centers; religious sites; restaurants; universities; beauty salons and barbershops; check-cashing offices; and other sites along the community’s main shopping districts. Targeted recruitment was aimed at specific organizations suggested by the community advisory board that had members from populations that were underrepresented during street recruitment (e.g., the elderly, nonsmokers, higher-income individuals).

Data Collection and Analysis

Fourteen focus groups, stratified by gender, age (18–24, 25–49, and ≥ 50 years), and smoking status were conducted with 104 adult Harlem residents. Six groups were conducted with former and never smokers, and 8 were conducted with current smokers. Current smokers were identified by their positive response to 2 questions:

“Have you smoked at least 100 cigarettes in your entire life?”

and

“Do you now smoke cigarettes everyday, some days, or not at all?”

Nonsmokers were those who answered no to the first question. Former smokers answered yes to the first question and “not at all” to the second question. The focus group guide was developed by investigators in consultation with the community advisory board. The interview guide included open-ended questions that focused on respondents’ attitudes toward smoking, current and past smoking behaviors, smoking by family and friends, the social context of smoking in Central Harlem, and experiences of quitting. Sessions were conducted by 2 trained professional facilitators who were familiar with the community and were matched to groups by gender and race. The groups lasted approximately 2 hours, and each session was audiotaped.

Audiotapes of the focus groups were transcribed and entered into Atlas.ti software.35 Researchers used an inductive approach that was based on the principles of grounded theory to analyze the data. In grounded theory, themes, patterns, or categories emerge from the data.36 Based on feedback from the community advisory board, a theme-oriented and iterative process was used to develop a qualitative analysis codebook. The process allowed for the identification and refinement of the main domain areas of analyses. Major domains were represented by a code. Subcodes were developed that represented different components of each major domain. The final codebook included explicit definitions, examples, and established criteria for the use of each code and subcode. Two researchers coded all the transcripts, and interrater agreement reached 86% at the level of the domain.

After coding, themes related to access to cigarettes were chosen for exploration. The use of the term $5 man and discussion about a new underground cigarette economy in Harlem emerged in all focus groups, and the underground cigarette economy was identified as an important theme. Researchers used the coding scheme to identify important co-occurring concepts that were empirically or theoretically related to this topic and were consistently observed across multiple focus groups. Related concepts included perceptions of tobacco policies, social environment, stress, aspects of addiction, and community norms. The next step involved investigating the relationship of each concept to the underground cigarette economy within and across groups, and exploring a diversity of experience attributable to gender, age, and smoking status. We further sought to contextualize the data by searching for exceptions that might disconfirm our analytic observations. Lastly, the full transcripts were reviewed again to search for corroborating or contrasting instances and to verify the final analysis.

RESULTS

Sample Characteristics

Table 1 ▶ shows the demographic characteristics of the study population, which differed from the population in Harlem surveyed by the CHS. The focus group sample was mostly Blacks, included more men than women, and tended to be poorer and less educated than the general Harlem population. The mean age of focus-group participants was 43 years, with ages ranging from 18 to 78 years.

TABLE 1—

Demographic Characteristics of Central Harlem Focus Group Participants and Central Harlem Community Health Survey Participants: New York, New York, 2003

Characteristic	Focus Group Discussion Participants (N = 104), No. (%)	Central Harlem Community Health Survey 2003a (Estimated N = 112 312), No. (%)	Pb
Gender
Men*	57 (54.8)	49 609 (44.0)	.037
Women*	47 (45.2)	62 703 (56.0)	.037
Age, y
18–24	17 (16.34)	17 576 (15.7)	> .99
25–49	58 (55.76)	56 146 (50.2)	.30
≥ 50	29 (27.88)	38 080 (34.1)	.22
Ethnicity
Black**	83 (79.8)	73 117 (66.4)	.002
Latino	12 (11.53)	19 475 (16.6)	.152
White	2 (1.92)	11 004 (9.3)	. . .C
Other	7 (6.73)	8 656 (7.8)	.862
Education level
Less than high school diploma	19 (18.27)	20 039 (18.7)	> .99
High school diploma**	48 (46.15)	31 325 (28.6)	< .001
Some college	34 (32.69)	30 214 (25.8)	.228
College graduate	3 (2.88)	30 475 (26.9)	. . .C
Annual income, $
< 25 000**	78 (75.0)	59 699 (54.6)	< .001
25 000–49 999	22 (21.15)	29 439 (27.0)	.085
≥ 50 000	4 (3.84)	11 329 (10.5)	. . .C

^aSample was weighted for analysis.

^bP value derived from χ² test.

^cExpected values less than 5.

*α = 0.05 **α = 0.01

Access to Illegal Cigarettes

Most smokers were aware of a recent expansion in the illegal cigarette market in Harlem, which they observed corresponded with the cigarette tax increase. The $5 man was the commonly used term for a highly visible network of bootleggers who appeared after the tax increase throughout the community on street corners, in busy shopping areas, outside subway entrances, and in apartment buildings. Most smokers admitted buying cigarettes from the $5 man rather than stores as a way of avoiding higher prices:

“I used to go to the store. Now I make sure I find one of those guys.” (Male smoker, aged 25–49 years)

“Everyone is getting them off the street. You can even get them in the hospital.” (Male smoker, aged ≥ 50 years)

“Now it’s like 20 guys to a block and each one of them . . . they’ve got cigarettes for sale.” (Male smoker, ≥ 50 years)

“They’re too expensive, so you have to come out and do the . . . hustle in the street.” (Male smoker, ≥ 50 years)

Remarkably, nonsmokers were also familiar with the new underground cigarette market, suggesting the pervasiveness of this illegal activity:

“I never thought I’d see the day where people would be running around actually looking for the cigarette man.”

“That’s the new push now, the cigarette man.” (Female nonsmoker, ≥ 50 years)

“They’ll walk by with a bag on their shoulder, anybody walk up, male or female, [yelling] ‘cigarettes $5, Newport $5, Marlboro $5.’” (Male nonsmoker, ≥ 50 years)

Although the new $5 man was described as the primary and most easily accessible source of reduced-price cigarettes, respondents noted additional opportunities for illegal sales in this community, including buying “loosies”— single, out-of-package cigarettes bought at local grocery stores or bodegas. Buying cigarettes out of state was another price-minimizing strategy:

“It’s been about 4 months since I stopped buying packs. I buy loose cigarettes.” (Female non-smoker, 25–49 years)

“The prices went up so much only here that people are forced now to go across the state lines and buy them in bulk.” (Male smoker, 25–49 years)

Other Strategies to Avoid the Cigarette Price Increase

Smokers described additional strategies to avoid price increases such as cutting down and switching to discount brands, but purchasing from the $5 man was the principal behavioral response to the tax increase reported by respondents. Although almost all smokers described a history of quit attempts, only 1 person described quitting because of the tax increase. Smokers noted that opportunities for reduced-price cigarettes were so prevalent that most smokers needed to alter only purchasing patterns rather than smoking patterns, although 1 smoker suggested she was cutting down to make packs last longer:

“I’m buying a pack of cigarettes and trying to make that pack last. I’m shopping around for the cheapest price.” (Female smoker, 25–49 years)

“Because the cost of cigarettes have gone to $7 a pack, I’ll go for a cheaper brand that’s closer to what I prefer to smoke.” (Male smoker, 25–49 years)

Attitudes Toward Illegal Sales

Bootleggers were uniformly viewed as a justifiable and appreciated response to the high price of cigarettes. Smokers and non-smokers noted that in their economically depressed neighborhood, alternative sources for low-cost cigarettes would naturally arise in the wake of price increases:

“We’re thankful for the $5 man. Everyone is happy that the fare is gonna go back down. We’re happy that we found the man on 125^th Street that says Newport $5. We don’t care that the cops are standing right there and he’s doin’ something illegal. It’s not very important down on 86^th Street, Central Park West. That’s because they got a lot of money.” (Female smoker, 18–24 years)

“They [the smugglers] have really accommodated us . . . I don’t want to seem like a cheap-skate, but I ain’t giving you $7, close to $8, for a pack of cigarettes. In my neighborhood it hurts.” (Female smoker, 25–49 years)

Many respondents observed similarities between the $5 man network and the other illegal markets that also emerged as a normative response to the demand for products, both legal and illegal, that are otherwise out of reach or difficult to afford:

“Newports are the new drugs . . . like prohibition, like drug dealing . . . profits . . . if it’s in demand and the system says you can’t do it. Somebody gonna come up with something better on the street, it’s a given—OK? It’s a big profit. No matter what society thinks, smoking, metro card . . . it’s a money-making thing.” (Male smoker, ≥ 50 years)

The strong belief that the $5 man was a normative response to cigarettes price increases was coupled with respect for street sellers’ resourcefulness in creating a lucrative source of income in a neighborhood plagued by high unemployment and limited economic opportunities. Thus, bootlegging was viewed as mutually beneficial to seller and buyer:

“The profit is unbearable. You know, I watch guys today in Harlem. Bought cars [with the money they made] selling cigarettes. Buy vans and jeeps [with the money they made] selling cigarettes.” (Male smoker, 25–49 years)

“You paying almost $8 in the store, and you going to pay $5 on the street. I [the bootlegger] have $5 in my pocket. You have an extra $3. So, you see. It’s a win–win situation.”

“A cigarette is really important nowadays. It’s making a lot of money now. It’s like gold.” (Female smoker, 18–24 years).

Although overwhelmingly approving of the $5 man’s activities, several respondents perceived that bootleggers’ were exploiting market opportunities by targeting low-income neighborhoods:

“I sometimes wonder if someone is pushing cigarettes in Harlem because you can go outside of Harlem and you don’t see, you don’t hear. But in these streets of Harlem, someone is walking around saying, ‘cigarettes $5.’” (Female smoker, ≥ 50 years)

Attitudes Toward Tax Increase

Smokers viewed the cigarette tax increase with cynicism. Explanations for this attitude included suspicion of the government’s motivation, an expectation that the tax would increase illegal sales, and the belief that illegal sales would lead to an increase in the arrest of Black men in the community:

“They’re [tobacco industry] making a lot of money off me. Both of them. The government is charging. They’re working together.” (Female smoker, 25–49 years)

“Tax is supposed to raise revenue, but it decreased it because everything went to the black market.” (Male smoker, 25–49 years)

“It creates more of a way for the lot of us in jail too because for them raising the price and forcing us now to go across state line. They know what’s going on and they’ll catch you knowing we have a big demand for this, and they lock you up or they catch guys on the street and they grab them and put them in jail, and the most people they’re grabbing and putting in jail are people of color.” (Male smoker, 25–49 years)

Some respondents suggested that cynicism regarding the tax increase also arose from exposure to inconsistent messages regarding tobacco use, such as when antismoking public health campaigns and policies are coupled with increased access to less expensive cigarettes and tobacco industry incentive programs that are prevalent in low-income communities:

“I think [it’s] sort of a mixed message. It’s like ‘Don’t smoke’ . . . ‘I got $5 Newports.’ You know, the general consensus is, it’s time for you to stop smoking. You see all the ads. ‘Truth, Truth.’ You see it on TV. Then go outside your door—‘$5 Newports.’” (Female smoker, 25–49 years)

“I think this is a whole bunch of propaganda bullshit because on one hand you’ve got the surgeon general on this side and the other [side] you get enough packs and you win a prize.” (Male smoker, 25–49 years)

Role of Addiction

Most smokers said that regardless of price, they would find a way to purchase cigarettes, legally or illegally, because they were addicted and unable to quit. But they acknowledged that the rising price of cigarettes was leading to potentially detrimental tradeoffs for those smokers who were unable to quit:

“They would exchange their food stamps to get that [cigarettes].” (Female smoker, 25–49 years)

“You get your check, you pay your rent, and then the rest just go to cigarettes.” (Female nonsmoker, 18–24 years)

“I was just disgusted because I can’t afford to buy these cigarettes and on the way to the store I wanted to burst out in tears that I have to buy these when I need this money for something else.” (Female smoker, ≥ 50 years)

Smoking as a Community Norm

Focus group participants described smoking as a prevailing community norm. Explicit support for illegal sales to preserve access to affordable cigarettes and the frequently expressed attitude by smokers and nonsmokers that smoking was an individual’s choice were indications of the social acceptability of smoking. Moreover, respondents’ attitudes toward smoking appeared to be influenced by the perception that a majority of people in the community smoke. When asked what percentage of people living in Harlem smoke, the responses ranged from 50% to 85%:

“It’s like 75% people who actually smoke. People don’t mind as long as it’s not messing with them, they don’t care, that’s people personal choice. You can only find like a handful of people that actually care.” (Female nonsmoker, 18–24 years)

“Everybody do it. It’s just the normal thing. It’s okay.” (Male smoker, 25–49 years)

Smoking as a social norm was placed in the broader context of both individual- and community-level factors that promote smoking. Specifically, tobacco use was described as a method for dealing with the enormous stress associated with poverty, a lack of social support, crime, unemployment, and discrimination. With a lack of optimism about the future and few resources to provide relief from social and economic problems, respondents described little incentive to give up one of their most important coping mechanisms.

“It’s stressful living in Harlem especially with the economy now. You can find a pack of cigarettes before you can find a job.” (Female smoker, 18–24 years)

“I need this to calm down and that plays a big role in the life of a Black man of course, there’s a lot of things that’s put to us that stresses us out and we run to these packs.” (Male smoker, 25–49 years)

“Ya know, we’re poor and this [smoking] is the way we get over a lot of things.” (Female smoker, 18–24 years)

“Generally it’s associated with stress. I just got out of prison.” (Male smoker, 18–24 years)

Perceived pro-smoking community norms, a stressful social and economic environment, and the availability of illegal, reduced-price cigarettes worked together to reinforce smoking and undermine cessation. Respondents described specific examples of visual cues to smoke present throughout the community:

“Every stoop you pass by be people smoking a cigarette.” (Female nonsmoker, 25–49 years)

“I’ll see a person smoking and it’ll get me. Corner boys are smoking and I wanna smoke.” (Male smoker, 25–49 years)

“You know it’s going to kill you and you see that as a young Black man I don’t want to see myself as being weak and me depending on this little thing, and I say I can beat this, but the loosie is right there.” (Male smoker, 18–24 years)

“How could we all forget the biggest advertisement going now when you pass the corner on the street (mimics people selling cigarettes). That’s the new advertisement, the people who sell them.” (Female nonsmoker, ≥ 50 years)

DISCUSSION

For smokers living in Harlem, smoking was an important strategy to cope with individual-level stressors such as low incomes and unemployment. At the community level, respondents described pro-smoking social norms and widespread environmental cues to smoke that reinforced tobacco use. Within this socioeconomic and cultural milieu, the emergence of the $5 man was both expected and largely applauded by smokers and nonsmokers alike. Respondents viewed buying illegal cigarettes from this new source as a normative strategy to avoid burdensome price increases and to maintain consumption levels. However, pervasive illegal sales facilitated smoking by creating a visible trigger to smoke and ensuring easy access to tobacco products.

Concerns about the unfair burden of tax increases for low-income populations are generally countered by strong evidence that poor smokers are more price sensitive and therefore more likely to reduce consumption and quit than are affluent smokers.37 Our results demonstrate a fault line in this public health argument that has not been sufficiently acknowledged or studied.38^–40 The purchase of illegal cigarettes available on the street was a vivid manifestation of the financial burden of smoking and cigarette tax increases among the poor who do not quit. Further, smokers who did not quit in response to the tax increases described a willingness to do without other necessities in order to purchase cigarettes.

In an analysis of cigarette tax policy, Remler noted that tobacco tax increases will heavily burden poor smokers who do not quit no matter how the tax burden is assessed. Remler further argued that public health advocates should acknowledge the price paid by some in the drive for broader public health.40 Similarly, Wilson and Tomson’s study of the ethics of tobacco taxation points out that although cigarette taxes achieve far more benefit than harm at the population level, policymakers should consider options that minimize potential hardships for those who continue to smoke.39

As a counterbalance to cigarette tax increases, tobacco-control advocates promote spending a portion of tax revenue on smoking-cessation services. Indeed, in NYC, the tax increase was accompanied by programs specifically recommended to reduce socioeconomic disparities in smoking prevalence.6 Population-based cessation services that included free nicotine patches were made available through the New York State Quitline, a free telephone-based smoking cessation counseling service. The state and city also provide free counseling and pharmacotherapy at several smoking cessation clinics located in low-income communities. Further, New York State offers a Medicaid pharmacotherapy benefit that preceded the tax increase. Yet, only a handful of those interviewed were aware of these resources.

Although this is not a representative sample of smokers in NYC, the results suggest a need for renewed efforts to raise awareness of cessation services. More generally, research is needed to investigate interventions that address both individual and structural barriers to utilization of evidence-based cessation resources among disadvantaged populations where smoking rates are highest. Our findings also suggest that tobacco tax evasion must be addressed in a more comprehensive manner to assist low-income communities in reducing the burden of smuggling activity. Networks that link local bootleggers in low-income communities to widespread smuggling activities and the targeting of poor communities should be further investigated.

This study may have limited generalizability to other populations and settings. Our sample was poorer and less educated than the general population of Harlem and was selected from a single community in NYC. Yet data from the CHS suggest that purchases of cigarettes from “another person” were highest in communities with the lowest median income throughout NYC. Thus, the phenomenon may not be isolated to Harlem. This study also does not quantify the extent of illegal street sales and purchases. It does provide insight, however, into a form of tax evasion and illegal sales that has not been previously reported in the literature.3^,22^–26^,41^,42 Finally, several of our findings are consistent with those reported in similar qualitative analyses conducted in the United Kingdom.14^,22

Although interest in quitting was high among the smokers we interviewed, bootleggers created an environment in which cheap cigarettes were easier to access than cessation services. Illegal cigarette sales continue to undermine the public health goals of the tax increase. We do not dispute that cigarette taxes are an effective method for reducing tobacco use. Yet, our findings support the argument that programs and policies to alter health risk behaviors are limited without addressing the structural inequalities and pressing social and material contextual factors that help sustain nicotine addiction, shape individual attitudes and behaviors, and inform community norms.14^,43^,44 Without consideration of these issues, tax policies may negatively affect disadvantaged communities by increasing illegal sales activity and, paradoxically, cigarette availability.

It is in this context that engaging communities in the implementation of tobacco policies seems most relevant. Community-based participatory research and action models that include community residents and organizations in the process of social change show promise in reducing tobacco-related health disparities.45^–48 Community members may be more effective than local government agencies in creating local educational campaigns that reframe illegal sales as exploitive of poor neighborhoods and deleterious to the health of the community. It is also crucial to collaborate with community members to develop interventions that address pro-smoking norms. Finally, research is needed to elucidate other mutable factors that shape the impact of tobacco tax policies in disparate areas so that the value of this strategy is fully realized and negative consequences are minimized.