The Potential for Using Excise Taxes to Reduce Smoking

Abstract

We examine the potential for reducing cigarette, smoking through increases in cigarette excise taxes by estimating the price elasticity of demand for cigarettes. Using information on individual smoking behavior for a sample of adults in the 1976 Health Interview Survey, we estimate the adult price elasticity of demand for cigarettes to be -.45. Moreover, we find that price has its greatest effect on the smoking behavior of young males and that it operates primarily on the decision to begin smoking regularly rather than via adjustments in the quantity of cigarettes smoked by smokers. It follows that, if future reductions in cigarette smoking are desired, Federal excise tax policy can be a potent tool to accomplish this goal, but only in the long run. An exèise tax increase, if'maintatned tn rea' terms, woUld discourage smoking participation by successive cohorts of young adults and those reduced smoking levels would be reflected in aggregate smoking as these cohorts mature. In the short run however, the impact of an excise tax increase on aggregate cigarette consumption would be relatively small.

Cigarette smoking by socioeconomic group, sex, and age: effects of price, income, and health publicity

“…Young people generally have relatively low incomes with a high proportion of it available for discretionary expenditure, so that changes in income are more likely to affect their smoking patterns. The results do not confirm the findings of Lewit and Coate,22 that American male teenagers have a high response to changes in cigarette prices, and are more compatible with recent results that report a low response to price by American teenagers similar to that of American adults 23. Our results do, however, suggest that cigarette consumption in teenage women, the only age group in which women smoke more than men, may be more affected by price rises, although for them the effects of price and income appear to be interrelated.…”

“…Lewit and Coate studied teenage smoking in the United States and concluded that: “Teenage price elasticities of demand are large. The smoking participation (prevalence) elasticity equals -1.2 and the (total) quantity smoked elasticity -1.4.”22 There are no estimates of British teenagers' or other age groups' responses to changes in cigarette price, and there is now differing evidence from the United States suggesting a much lower price elasticity among teenagers not significantly different from the estimate of -0.23 for American adults 23…”

Tobacco lobby political influence on US state legislatures in the 1990s

“…It has also included working with and through general business organisations, vending machine operators, candy and tobacco distributer associations, chambers of commerce, agribusiness groups, statewide tort and product liability “reform” groups, medical associations, and state anti-taxpayer coalitions 724 25 27 32 45 89 …”

Policy initiatives to enhance smoking cessation and harm reduction

“…This includes current smokers who stop and adolescents who do not start. 37, 38 It also has been suggested that price influences the amount of smoking by individuals who remain smokers. Data from Canada are particularly convincing in the case of teenagers and young adults, where there has been a sharp decline in rates of regular smokers, but an increase in occasional smokers.…”