Variation in e-cigarette taxation supplies potentially rich research opportunities for studies of the on-the-ground effects of tax policy. In this spirit, The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data, by Chad Cotti (Univ. Wisc-Oshkosh--economics) et al., estimates the effects of "e-cigarette taxes enacted in eight states and two large counties on e-cigarette prices, e-cigarette sales, and sales of other tobacco products." (One critical data limitation is the study's reliance on e-cigarette data that excludes sales through specialty vape shops and online sales.) The intersection of two core findings help frame what the authors define as a "detrimental unintended consequence of e-cigarette taxes."
One key finding is that "e-cigarette taxes are over-shifted to consumer prices, which is most likely in a market with high concentration." A second key finding is that "e-cigarettes are elastic goods and their use substantially reduces cigarette sales." However, "a 1% increase in e-cigarette taxes increases cigarette sales by about 0.14%.” (emphasis added) What these two findings imply is that even well-intentioned efforts to dampen e-cigarette use (especially among teens and young adults) through tax policy may well induce for some a migration from e-cigarettes to even more harmful cigarettes.
Comments