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Does every US smoker bear the same cigarette tax?

Xin Xu1, Ann Malarcher, Alissa O'Halloran

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Addiction (Abingdon, England)
|May 28, 2014
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Summary

Many US smokers avoid higher cigarette taxes by using price-minimizing strategies like buying cartons or generic brands. These tactics significantly reduce the financial impact of excise tax increases on smokers.

Keywords:
Behaviorcigarette smokingpass-through ratepricessmokingtaxes

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Area of Science:

  • Public Health
  • Health Economics
  • Tobacco Control

Background:

  • State cigarette excise taxes are a key tobacco control strategy.
  • Understanding tax pass-through rates is crucial for evaluating tax policy effectiveness.
  • Smokers may employ various strategies to minimize the financial impact of these taxes.

Purpose of the Study:

  • To evaluate state cigarette excise tax pass-through rates.
  • To assess the effectiveness of price-minimizing strategies used by smokers.

Main Methods:

  • Multivariate regression analysis was conducted on data from a national survey of adult current smokers.
  • Data included prices paid, considering strategies like coupon use, pack vs. carton purchase, brand type, and purchase location (e.g., Indian reservations).

Main Results:

  • Smokers using price-minimizing strategies paid substantially less than those who did not.
  • Premium brand users purchasing by the pack outside Indian reservations bore the full excise tax plus an additional cost.
  • Carton purchasers, generic brand users, and those buying from Indian reservations experienced lower pass-through rates (30-83% of the tax).

Conclusions:

  • A significant portion of US smokers utilize strategies to circumvent the full financial burden of state cigarette excise taxes.
  • Purchasing in cartons, opting for generic brands, and buying from Indian reservations are effective avoidance methods.
  • These findings highlight the complex interplay between taxation, consumer behavior, and tobacco control policy.