A new working paper by a group of economics and health policy researchers finds that a law forcing all nicotine products to be taxed at the same rate would cause increased smoking and would damage rather than improve public health.
A law that would do exactly that was proposed earlier this year by Illinois Senator Dick Durbin—the Tobacco Tax Equity Act (S 1314), based on previously introduced Durbin tobacco tax parity bills. An identical House bill (HR 2786) was introduced at the same time by Illinois Representative Raja Krishnamoorthi. Both members of Congress are Democrats, and longtime opponents of vaping and tobacco harm reduction.
The Tobacco Tax Equity Act would double the federal tax on cigarettes, and apply the same tax rate to all other consumer nicotine products, with annual increases based on inflation. The tax on vaping products would be determined later by the Treasury Department. There is currently no federal tax on e-cigarettes or e-liquid.
The working paper, published by the San Diego State University Center for Health Economics and Policy Studies, suggests that doubling the rate of state and local e-cigarette taxes would reduce youth vaping barely more than it would increase youth smoking. The effect wouldn’t be nearly large enough to provide a health dividend, considering that vaping is the clearly less harmful practice. And the tax created by the Durbin bill would likely be much larger than a doubling of existing state and local taxes.
“If ENDS are substantially safer products as suggested by several major government-commissioned reviews,” write the working paper’s authors, “our results suggest that the proposed bill may harm youth health in the United States.”
The results align with recommendations in a recent paper co-authored by 15 former presidents of the Society for Research on Nicotine and Tobacco. Those tobacco control leaders suggest that taxing cigarettes “heavily” and vaping products “modestly” would “encourage adult smokers to quit smoking or to switch to less expensive e-cigarettes,” and discourage vaping uptake by adolescents.
The new paper’s authors modeled the effects of increased vaping product taxes on cigarette and vaping product usage, on sources of youth vaping products purchases, and on youths’ perceived risk of vaping. They used 2011-2019 data from the University of Michigan/National Institute on Drug Abuse (NIDA) Monitoring the Future survey and the Centers for Disease Control and Prevention (CDC) Youth Risk Behavior Surveillance System survey.
The results show a large substitution effect when e-cigarette taxes are increased; youth buy more combustible cigarettes instead of lower-risk vaping products. The results match previous studies showing that increasing taxes on either cigarettes or vaping products increases sales of the other. Previous research shows that this result bears out for adults, pregnant women, youth, and the overall population. The products are economic substitutes: when either cigarettes or vaping products are more expensive, a significant number of people will switch to the other.
The paper also shows that raising taxes on e-cigarettes increases youth perception that they are harmful. Unfortunately, that effect combined with the lower comparative cost of the substitute product (cigarettes) is likely to increase youth smoking—which is not the intention behind raising taxes on vaping products.
The working paper was authored by nine health economists, including Michael Pesko of Georgia State University and Abigail Friedman of Yale. Both have been active in research on vaping and its economic relationship with smoking. The paper was funded by several grants, including from the National Institute on Drug Abuse and the Robert Wood Johnson Foundation.
Previous research by Pesko (and some of his co-authors on this paper) has shown that cigarettes and vaping products are economic substitutes. That is, when one kind of tobacco product is more expensive, a significant number of people will switch to the other. Friedman authored a recent paper showing that a ban on flavored vaping products in San Francisco led to increased smoking by high school students—which did not happen in cities without such a ban.
The other co-authors are Rahi Abouk (William Paterson University), Charles Courtemanche (University of Kentucky), Dhaval Dave (Bentley University), Bo Feng (Georgia State University), Johanna Catherine Maclean (Temple University), and Joseph Sabia and Samuel Stafford (San Diego State University). The paper was funded by several grants, including from NIDA and the Robert Wood Johnson Foundation.