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JB asked in the comments to an earlier post what we know about who bears the burden of cigarette taxation. A brief exploration of the economic literature reveals the following:

(1) The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data
Author: Harding, Matthew; Leibtag, Ephraim; Lovenheim, Michael F.
Author Affiliation: Stanford U; USDA; Cornell U
Source: American Economic Journal: Economic Policy, November 2012, v. 4, iss. 4, pp. 169-98
Publication Date: November 2012
Abstract: We use Nielsen Homescan data to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are less than fully passed through to consumer prices, suggesting consumers and producers split the excess burden of these taxes. Using information on consumer location, we show the availability of lower-tax goods across state borders creates significant differences in the pass-through rate. Tax avoidance opportunities also have a sizable effect on purchasing behavior by altering consumer search, prices paid and quantities purchased. Finally, we demonstrate that the incidence of cigarette taxes and the border effect varies by household income and education.

 

WINTERCOW: here is a link for those who can get access. On p. 192 we find that the poor don’t actually experience as serious an impact of the tax burden as you would think, because although the poor smoke more, they also search more for alternatives (roll your own, out of state purchases, etc.) than wealthier people do. You can see Table 8 in the paper for specific information on how much they actually bear.

 

(2) Consumer Response to Cigarette Excise Tax Changes
Author: Chiou, Lesley; Muehlegger, Eric
Author Affiliation: Occidental College; Harvard University
Publisher Information: Harvard University, John F. Kennedy School of Government, Working Paper Series
Publication Date: 2010
Abstract: We use a rich dataset of weekly cigarette sales to examine how consumers adapt their behavior before and after excise taxincreases–whether by reducing demand, stockpiling, traveling to low-tax jurisdictions, or substituting towards lower-cost brands. Consumer response varies substantially for different types of cigarettes. Stockpiling primarily occurs for discount cigarettes and is most pronounced at stores far from lower-tax jurisdictions. Border-crossing is greatest at stores close to low-tax jurisdictions and occurs primarily for cigarettessold by the carton. Finally, we find modest short-run substitution towards lower-cost brands following a tax-increase, consistent with consumers smoothing the transition to higher cigarette taxes. These differences in consumer behavior lead to meaningful differences intax incidence–pass-through is higher for discount cigarettes which have more inelastic demand. Pass-through is lower near low-taxborders, especially for cigarettes sold by the carton for which cross-border evasion is greatest.

 

WINTERCOW: here is a copy of the paper. Table 4 has some relevant data. It does not appear that stockpiling behavior varies by income class.

 

(3) Who Pays Cigarette Taxes? The Impact of Consumer Price Search
Author: DeCicca, Philip; Kenkel, Donald S.; Liu, Feng
Author Affiliation: Unlisted; Unlisted; Unlisted
Publisher Information: National Bureau of Economic Research, Inc, NBER Working Papers: 15942
Publication Date: 2010
Abstract: We conduct an empirical study of the impact of consumer price-search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices smokers report actually paying for cigarettes. We document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to the prices paid by consumers who undertake more price search–carton buyers, and especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find suggestive evidence thattaxes are shifted at slightly higher rates to the prices paid by non-daily smokers, less addicted smokers, and smokers of light cigarettes.
Publication Type: Working Paper
Availability: http://www.nber.org.ezp.lib.rochester.edu/papers/w15942.pdf

 

WINTERCOW: It appears that we don’t have a lot of direct research on just how much of the burden is passed on to the poor. Here is a key extract from the end of the paper: ”

Another direction for future work is to explore the implications of price search
for the incidence of cigarette taxes across income groups. Standard analyses conclude
that because smokers have lower incomes in the U.S., cigarette taxes are regressive
(Lyon and Schwab 1995, Colman and Remler 2008). These standard analyses are
incomplete if taxes are differentially passed through to the prices paid by consumers
with different incomes. Indeed, Heiding, Leibtag and Lovenheim (2010) find that
cigarette taxes are fully shifted to the prices middle-income consumers pay, but less
than fully shifted to the prices paid by both low- and high-income consumers. Future
work could further explore the role of consumer price search in these patterns of tax
incidence and income.

 

 

(4) Tax Incidence When Individuals Are Time-Inconsistent: The Case of Cigarette Excise Taxes
Author: Gruber, Jonathan; Koszegi, Botond
Author Affiliation: MIT; U CA, Berkeley
Source: Journal of Public Economics, August 2004, v. 88, iss. 9-10, pp. 1959-87
Publication Date: August 2004
Abstract: One of the most cogent criticisms of excise taxes is their regressivity, with lower income groups spending a much larger share of their income on goods such as cigarettes than do higher income groups. We argue that traditional quantity-based measures of incidenceare only appropriate under a very restrictive “time-consistent” model of consumption of sin goods. A model that is much more consistent with existing evidence on smoking decisions is a time-inconsistent formulation where excise taxes on cigarettes serve a self-control function that is valued by smokers who would like to quit but cannot. This self-control function benefits lower income groups more, since they have a significantly higher price sensitivity of smoking. Calibrations show that, as a result, cigarette taxes are much less regressive than previously assumed, and are even progressive for a wide variety of parameter values.

 

WINTERCOW: So we have suggestions that cigarette taxes are possibly progessive. One important reason for this is that lower income consumers are much more sensitive to price changes than higher income ones and it is not just in search for lower priced cigarettes but also their propensity to quit.

 

 

(5) Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?
Author: Lyon, Andrew B.; Schwab, Robert M.
Author Affiliation: U MD; U MD
Source: Review of Economics and Statistics, August 1995, v. 77, iss. 3, pp. 389-406
Publication Date: August 1995
Abstract: We construct measures of tax incidence over the life-cycle and compare these measures to traditional measures based on annual data. Annual measures of the incidence of taxes on consumption goods may differ from life-cycle measures for three reasons. First, annual measures of income reflect transitory components which should have smaller effects on consumption than permanent changes in income. Second, income measured in a single period differs from lifetime income due to age-related differences in earnings. Third, consumption of certain items follows life-cycle patterns independent of changes in income. Surprisingly, we find that these effects cause little change in the assessment of the incidence of taxes on cigarettes. For alcohol, we find that a tax on its consumption is slightly less regressive when measured with respect to lifetime income than when measured with respect to annual income.
ISSN: 00346535
Publication Type: Journal Article

 

WINTERCOW: On p. 398 and 399 of the paper you will find their evidence that cigarette taxes, over the 1968-72 period, appear to be regressive.

 

 

There are a few other scattered papers that tangentially address the question. But I would say based on the limited evidence that the jury is out on the actual incidence.

187 Responses to “Cigarette Tax Incidence”

  1. Harry says:

    Wow! Ask a good question, jb, and you might get some help.

    Regarding cigarettes, and the butts, and Coase, why should I or my yard guy not be salaried by the federal government to pick up the many butts and cigarette trash (many menthol brands, Newport, Marlboro menthol, even Virginia Slims menthol) that people throw along the road? Surely this is a problem that should be solved by government using some of Wintercow’s and Coyote’s money. Steve Landsburg’s money. He is awash in money, we assume, with enough to pay for a gardener for all three of us, plus governor Cuomo’s Mexican gardener.

  2. Harry says:

    Moreover, I am overwhelmed by WC, this fountain of facts and ideas, jb.

    Straight cigarettes used to cost 25 cents a pack in the machine in my college dorm, about the same as a gallon of gas. It took about nine gallons of gas to do a road trip to Vassar. How much would it cost to go to Vassar, per person, assuming they consumed seven Marlboros, and drank 5/6 of a six pack, the designated driver doing two beers each way, and being reimbursed fully by the passengers for the use of the car plus the gas and his beers? Four passengers.

    I would like to see how fast it would take Ben Bernanke to solve that word problem, and then to predict what it would cost for the road trip per person in 2015, assuming the Fed continues to buy ten-year Treasurys at the current pace.

  3. Michael says:

    On a couple of links, I would mention that although rolling your own and going out of the way to puchase out of state (Missouri) cigarettes doesn’t necessarily mean extra expenditure, it does possibly place an additional cost on the poor. Rolling you own takes a bit of time and out of state probably requires planning out the purchases more than just deciding to run to the corner market. (I’m more familiar with the former than the latter, though I don’t smoke.)

  4. Harry says:

    Of course if you are a connected New Yorker, you buy bootleg cartons off the back of a trailer. If you are really connected, you can do one-stop shopping for a Glock and other things to smoke and ingest. Buy local. Don’t try this on Center Street.

  5. jb says:

    Wow ask and I shall receive…thanks so much WC, truly a trove of research to look over here. If you come to the Berkshires and don’t let me know, you’ll have yourself to blame because the offer to buy you a beer has increased to at least 2 beers.

    Hmmm let’s see. Let me make a very simplisitic generalization that these studies on the whole suggest that “smoking is not necessarily regressive”. So let’s assume that’s the case. That means that the poor do not quit smoking in proportion to the wealthy when these taxes are imposed. But cigarette taxes are touted as a way to get people to quit, for their own good. If that is the intent, then cigarette taxes appear to be helping upper income classes, but not the poor, right?

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    with glute activating actions to help construct the buttocks and
    glute shelf.
    You can differ the lunge by performing them with dumbbells as a substitute of a barbell, and you may
    even do strolling lunges in case your gym is large enough for it.
    These issues can spell severe trouble for elements of the physique past your butt, together with again ache and knee soreness.
    But sculpting your bottom doesn’t should be
    a strictly aesthetic pursuit. The truth is, our glute muscular
    tissues do rather more than just make us look good in yoga pants.
    They help us preserve correct posture and engage in activities like running, jumping,
    and climbing.
    The hip thrust is a excessive quality exercise to target
    the glute max, and introducing a band lets you goal the glute medius and minimus too.
    As you push out in opposition to the band, you’ll name upon the facet glutes
    to contract to externally rotate the hips. This pushing against the band all through the range of motion will get the aspect glutes on fireplace, serving
    to to promote aspect glute growth. Some of the most effective
    workout routines to train the higher glutes additionally work different muscles within the
    decrease body, together with the quadriceps and hamstrings.
    Clamshells and fireplace hydrants are two glorious glute isolation workout routines
    that could be carried out with bodyweight or with added resistance.
    We recommend adding a band to those workouts to work the muscular tissues more to construct strength and muscle.
    We grouped these exercises together as they give consideration to exterior hip rotation and are great for isolating the glutes.

    Choose the one that aligns best together with your targets and out there
    gear. The sensation should be comparable to clenching your bicep as hard as you probably can.
    If you’re not experiencing this, which means your glutes aren’t firing.

    The lunge will target both the quads and glutes, as
    both knee and hip involvement is required. This does not imply nevertheless, we can’t enhance the bias in the course of one or the opposite.
    If you lunge ahead and then drive the bottom away again to your starting position, this will be extra quads.
    As A Outcome Of the knee is having to do the bulk of the
    work to extend the knee and drive your self again up. For
    the greatest leads to glute muscle growth, add an additional, glute-intensive
    workout day. Sprinting is a robust activity that requires incredible energy.
    Introducing sprinting, which can be referred to as “fartlek training,” into
    your routine may help build up your glute energy.

    It’s essential to even be aware of your pelvis during all higher glute exercises, Schemper says.
    Hip thrusts may additionally be done utilizing a Smith machine,
    present in most gyms. Align the bar on prime of your hips and perform the train as described.
    Some health services have began to offer dedicated hip thrust machines as nicely.
    Simply like another muscle, your glutes will grow quickest by coaching with reasonable hundreds for no much less than 10 units per muscle group each week.

    The glutes are your body’s engine and are concerned in virtually every important movement you carry out.
    The glute-building exercises you do within the fitness center are essential when it comes to getting stronger glutes, however so is your lifestyle.

    “To build any new lean mass is a really demanding process,” says
    Travis Burkybile, C.S.C.S. “If you might be under-eating by a big amount, they positively will not grow.”
    The secondary muscular tissues strolling strengths embrace your core and decrease again muscles, which help hold you up and allow you to
    maintain good posture as you progress, Horan says.
    When exploring any glute-focused workouts and charting out glute objectives, it helps to understand our glute anatomy.
    For a full decrease body routine, you’ll love
    this Final Leg Exercise to construct energy and mass.

    “If you’re just beginning out, consider functional day-to-day applications to train your gluteus maximus, like opting for the steps over escalators,” Katie says.
    If you like to break up your workouts by body half, you would possibly dedicate two days a week to your
    glutes, Katie says. Otherwise, incorporate a couple of of the workouts above into your common full-body
    routine. Aim for three sets of eight to 12 reps of any glute train, according to the
    NASM. Some of probably the most classic lower-body moves target your glute max (not
    to mention your gluteus medius and minimus).
    With the load pushing instantly downward against your hips, it challenges the glutes in essentially the most flattering
    way. You’re principally preventing gravity, pushing upward while the load is bidding you downward.

    Stepping into the gym, have you ever felt like your jeans are getting tighter in the incorrect places?
    Whereas all of us dream of that Instagram-worthy booty, it’s an actual bummer
    when your thighs steal the spotlight. To develop glutes (not
    legs), one should craft their exercises with the precision of a sculptor.
    We’re not changing these compound lifts with this train, we’re complementing them.

    In addition, studies are beginning to identify a job by which carbs instantly influence muscle protein synthesis.

    Nonetheless, if I’m being sincere, any lady performing these likely has some exceptionally
    well-developed glutes. Dr. Bret Contreas, the Glute Physician, also
    recommends them if that makes you are feeling better about doing
    them. For this reason, any exercise you may have pulled will require glute activation to stabilize
    your hips. Hip abduction occurs when the legs transfer straight out of the facet of the physique.
    This movement isn’t seen often in isolation in regular life but may be seen throughout sporting events similar to dribbling a ball and altering course.

    To maximize the effectiveness of lower glute workout routines, it’s important to focus on progressive overload,
    maintain consistency in your workouts, and activate your glutes earlier
    than every session. Single-leg cable kickbacks provide a targeted burn to the lower glutes, creating definition and form.
    Glute Ham Developer (GHD) workout routines work each hip extension and flexion to create robust, shapely muscles
    within the underbutt area. To carry out Lower Glute Coaching Workout A effectively, it’s best to
    do three sets of 10 to 15 reps per exercise. Progressive overload also
    needs to be carried out by growing weights or resistance bands over time.
    Lower Glute Coaching Exercise B incorporates single-leg Romanian deadlifts, entrance foot elevated split squats, and
    stability ball hip lift and leg curls for a complete decrease glute exercise.
    Research have shown that workouts like single-leg
    hip thrusts that focus on particular areas of muscle recruitment are extremely effective for constructing energy and hypertrophy in these areas.

    The gluteus maximus muscular tissues are answerable for the form and raise of
    your butt, plus play necessary roles like stabilizing and extending the hips and thighs throughout
    standing and walking. Bear In Mind, we’re not changing your compound lifts or lower physique routine; we’re
    enhancing them. These glute activation workout routines must be integrated into your normal leg day or glute workouts.
    Keeping your knee bent and foot flexed, raise your proper leg until your thigh is parallel with the floor and you’re “stamping” the ceiling with
    the proper foot. Lower your leg again down and back up in the path of the ceiling in a continuous movement.

    When performing this train, it’s necessary to verify you’re not relying
    in your quads for assist, as it’ll hinder glute activation.

    References:

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