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E-cigarette taxes lead to increased cigarette sales

Time: 2022-09-27

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New research paper: Onerous taxes on e-cigarettes lead to increased cigarette sales

A new paper published in the Journal of Health Economics shows that onerous taxes on vaping products have led to an increase in cigarette sales.


Co-authors of the peer-reviewed article — including leading U.S. tobacco economist Michael Pesco — used the NielsenIQ Retail Scanner Dataset (NRSD), which tracks Weekly sales of retailers in many countries and a large percentage of total sales among pharmacies, grocery stores, dollar stores, club stores and big box stores.


They found that e-cigarette taxes are passed almost entirely to consumer retail prices—in short, e-cigarette users typically have to pay the bulk of the tax.


The authors estimate, more specifically, that every dollar in e-cigarette taxes increases the price of e-cigarettes by 90 cents. As a result, policymakers heavily influence the retail price of e-cigarettes through tax legislation.


"Our study found that due to the e-cigarette tax, 1.9 packs of cigarettes are purchased for every Juul-sized e-cigarette obsolete."


Since e-cigarettes are a resilient commodity (with the price of the product causing a major shift in demand for it) and an economical substitute for cigarettes, tobacco harm reductionists and public health economists have sought to demonstrate that rising prices of e-cigarettes can easily make e-cigarettes Users and potential e-cigarette users are discouraged - making cigarettes, the far more dangerous nicotine substitute, the cheapest.


“The main takeaway here is that our study found that for every Juul-sized pack of e-cigarettes eliminated due to e-cigarette taxes, 1.9 packs of cigarettes are bought.” Michael Pesko is a co-author of the journal. The paper and a Georgia State University health economist told Filter.


Municipalities and states continued to adopt higher e-cigarette taxes, and in 2021 federal legislation raised e-cigarette taxes in an attempt to match taxes on cigarettes — a move that tobacco harm reduction advocates and critics viewed at best as a violation of intuitive. If you want to encourage people to transition from cigarettes to safer alternatives like e-cigarettes, you will naturally want to incentivize it by making safer products cheaper than deadly ones.


As the authors note, 13 states enacted vaping taxes between the end of the study period in December 2019 and June 2022, bringing the total number of states that tax vaping products to 30.


Perhaps most notably, California Gov. Gavin Newsom approved an October 2021 excise tax of 12.5 percent, a rate close to the state's current tax on cigarettes.


In Colorado, meanwhile, an e-cigarette tax may actually prevent a full ban: In May 2022, a Colorado Senate committee voted against a flavor ban because tobacco taxes are used to fund universal preschool education.


"Our findings also found that cigarette taxes significantly reduce cigarette sales, so if the goal is to end cigarette use, then raising cigarette taxes is the way to do it," Pesco said. The policy also has its critics, particularly those concerned with punitive taxes and potential criminalization of marginalized populations with the highest smoking rates.


Yet tobacco harm reduction advocates are generally united when it comes to limiting taxes on e-cigarettes.


"Cigarettes are a more dangerous product, so the e-cigarette tax seems to have led to substitution in the wrong direction," Pesco said.



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