The Economics of Tobacco Regulation: A Comprehensive Review

Exposure to cigarette taxes as a teenager and the persistence of smoking into adulthood

Are teenage and adult smoking causally related? Recent anti-tobacco policy is predicated on the assumption that preventing teenagers from smoking will ensure that fewer adults smoke, but direct evidence in support of this assumption is scant. Using data from three nationally representative sources and instrumenting for teenage smoking with cigarette taxes experienced at ages 14-17, we document a strong positive relationship between teenage and adult smoking: deterring 10 teenagers from smoking through raising cigarette taxes roughly translates into 5 fewer adult smokers. We conclude that efforts to reduce teenage smoking can have long-lasting consequences on smoking participation and, presumably, health.

Beyond the smoke: Historical analysis of the revenue implications of state cigarette tax policies, 1989 to 2019

INTRODUCTION

While cigarette taxes are a vital tobacco control tool, their impact on cigarette tax revenue has been largely understudied in the extant literature. This study examines how the level of cigarette taxes affects the revenue generated from cigarettes in the United States over a thirty-year period.

METHODS

We obtained the Tax Burden Data from the Centers for Disease Control and Prevention (1989-2019). Our dependent variables were gross cigarette tax revenue and per capita gross cigarette tax revenue, and our independent variable was state tax per pack. We used two-way fixed effects to estimate the relationship between state cigarette tax revenue and cigarette taxes, adjusting for state-level sociodemographic characteristics, state-fixed effects, and time trends.

RESULTS

The study reveals that raising cigarette state tax by 10 % led to a 7.2 % to 7.5 % increase in cigarette tax revenue. We also found state and regional variation in taxes and revenue, with the Northeast region having the highest taxes per pack and tax revenues. In 2019, most states had low or moderate taxes per pack and tax revenues per capita, while a few states had high taxes per pack and tax revenues per capita.

CONCLUSIONS

Our research demonstrates the positive impact of increased cigarette taxes on state tax revenue over three decades. Not only do higher taxes aid in tobacco control, but they also enhance state revenues that can be reinvested in state initiatives. Some states could potentially optimize their tax rates.

Do Tobacco Companies Have an Incentive to Promote "Harm Reduction" Products?: The Role of Competition

INTRODUCTION

Some cigarette companies have started to talk about replacing cigarettes with less harmful alternatives, which might include nicotine vaping products (NVPs), heated tobacco products (HTPs), and oral nicotine delivery products. We consider market competition as a primary driver of whether cigarette companies follow through on their stated intentions.

AIMS AND METHODS

We focus on the behavior of cigarette companies in the United States. We compare competition in the pre- and post-2012 time periods, analyze the impact of the growth in NVPs on smoking prevalence and cigarette company profits, and examine the potential future role of competition.

RESULTS

Since 2006, consumers have broadened their use of non-combustible nicotine delivery products (NCNDPs) to include, inter alia, NVPs, HTPs, and oral nicotine pouches. U.S. cigarette companies have acquired major stakes in each of these product categories which corresponds to a period of rapidly declining adult smoking prevalence, especially among younger adults (ages 18-24 years). The shifting dynamics of the nicotine product marketplace are also reflected in cigarette company stock prices. While cigarette companies are likely to promote HTPs and nicotine delivery products over NVPs, their incentives will be directly related to competition from independent firms, which in turn will depend on government regulation.

CONCLUSIONS

Although cigarette companies will back alternatives to combusted tobacco when threatened by competition, the prospects for their lasting conversion to NCNDPs will depend on the extent of such competition, which will be influenced by government regulation of tobacco products.

IMPLICATIONS

Regulations that limit competition from independent firms while also protecting cigarette company profits risk slowing or even reversing recent declines in smoking, especially among youth and young adults. Regulations that reduce the appeal and addictiveness of combusted tobacco products, such as higher cigarette taxes or a reduced nicotine standard, will encourage smokers to quit and/or switch to less harmful non-combusted forms of tobacco. The regulation of non-combustible nicotine delivery products and cigarettes should be proportionate to their relative risks, so that smokers have incentives to switch from combustibles to safer alternatives, and cigarette companies have incentives to promote safer products.

The effect of e-cigarette taxes on prepregnancy and prenatal smoking

E-cigarette taxes are an active area of legislation and have important regulatory implications by proxying e-cigarette accessibility. We examine the effect of e-cigarette taxes on prepregnancy and prenatal smoking using the near-universe of births to mothers conceiving between 2013 and 2019 in the United States. Using fixed effect regressions, we show that e-cigarette taxes increase prepregnancy and prenatal smoking. We also find evidence that e-cigarette taxes reduce prepregnancy and 3rd trimester e-cigarette use. Finally, we show that e-cigarette taxes increase news coverage of e-cigarettes and raise perceptions of risk of e-cigarettes.