Tobacco product prices before and after a statewide tobacco tax increase

Abstract

Background In 2013, the State of Minnesota Legislature passed a tobacco tax increase that increased the combined cigarette excise and sales tax by $1.75 (from $1.60 to $3.35) and increased the tax on non-cigarette tobacco products from 70% to 95% of the wholesale price. The current study explores the change in tobacco prices in retail locations and whether the tax increase was fully passed to consumers. Methods An observational study of tobacco retail prices was performed in a sample of 61 convenience stores in Minnesota, North Dakota, South Dakota, and Wisconsin. Six rounds of data were collected between May 2013 and January 2014. In each round, purchases were made at the same stores for the same four tobacco products (Camel Blue cigarettes, Marlboro Gold cigarettes, Grizzly Wintergreen moist smokeless tobacco, and Copenhagen Wintergreen moist smokeless tobacco). Results For all studied tobacco products, prices in Minnesota increased significantly after the tax increase (Round 1–Round 6). After controlling for price changes in neighboring states, the average price difference in Minnesota for the two cigarette brands increased by $1.89 and $1.81, which are both more than the $1.75 tax increase. For moist smokeless, the average price difference increased by $0.90 and $0.94. Significant price changes were not observed in the comparison states. After the introduction of the minimum moist smokeless tax, a significantly higher proportion of Minnesota stores offered price promotions on smokeless tobacco. Conclusions A large tobacco tax resulted in an average retail cigarette price exceeding the tax, suggesting the industry over-shifted the cigarette tax increase to consumers in Minnesota. The findings support the known public health benefit of tobacco tax increases while highlighting the need for additional information about how, or if, tobacco companies use price promotions to blunt the impact of tax increases.

Modelling the implications of reducing smoking prevalence: the benefits of increasing the UK tobacco duty escalator to public health and economic outcomes

“…There is evidence from the UK,32 USA33 and New Zealand34 indicating that tobacco prices increase differently across product categories after taxation. Ongoing research is required to simulate the complexities of tobacco industry pricing strategies, and encourage more sophisticated responses from governments that mitigate against ‘down-trading’ to cheaper tobacco products.…”

Exploring Impacts of Taxes and Hospitality Bans on Cigarette Prices and Smoking Prevalence Using a Large Dataset of Cigarette Prices at Stores 2001–2011, USA

“…Yet, only a few U.S. studies have provided a detailed characterization of cigarette price heterogeneity within states and counties by examining store-level prices. Three U.S. studies analyzed store-level price data [4,5,6] but they all focused on short time periods (≤2 year) and two focused on only a single geographic region [4,6]. …”

“…In the U.S., tobacco tax policy has used indirect taxes levied on the tobacco producer or vendor (“excise taxes”). Results of prior studies have been mixed regarding whether tobacco excise taxes are in fact fully passed on to the consumer [7,8], only partially passed on [5], or over-shifted [4,6,9,10,11]. Several studies have identified geographic differences in the pass-through rate [4,5] and two studies found differences by socioeconomic status [5,6], factors which may contribute to local variation in cigarette prices.…”

Longitudinal Associations of Local Cigarette Prices and Smoking Bans with Smoking Behavior in the Multi-Ethnic Study of Atherosclerosis

“…5,8,9,11–13 However, several prior studies found substantial variation in cigarette prices within states and counties. 14–16 In addition, prior work suggests geographically proximal exposures may be important determinants of smoking behavior- for example, individuals who lived closer to stores licensed to sell tobacco were less likely to quit smoking than those living farther away. 17,18 Thus, the tobacco retail environment near peoples’ homes may have a meaningful impact on their smoking behavior, and local cigarette prices may better reflect the prices to which they are exposed than state-level averages.…”