The Effect of Cigarette Taxation on Prices: An Empirical Analysis Using Local-Level Data

Ryan S. Sullivan, Donald H. Dutkowsky

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

This article combines new, author-collected tax data with data both from the American Chamber of Commerce Researchers Association cost of living index and from the Tax Burden on Tobacco to measure the relative effects of city, county, and state excise cigarette taxation on cigarette prices. The results indicate that a $1 increase in the state excise cigarette tax increases cigarette prices between $1.10 and $1.14, but that a $1 increase in a city- or county-level excise tax increases prices by $1.07. These findings are similar between premium and generic cigarette brands. Additionally, urban areas located near states with lower cigarette taxes tend to have lower cigarette prices relative to urban areas located near states with the same or higher tax rates.

Original languageEnglish (US)
Pages (from-to)687-711
Number of pages25
JournalPublic Finance Review
Volume40
Issue number6
DOIs
StatePublished - Nov 2012

Keywords

  • cigarettes
  • excise taxes
  • overshifting
  • tax incidence
  • taxation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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