Cigarette Taxes and Smoking

[Kent C]

http://object.cato.org/sites/cato.org/files/serials/files/regulation/2014/12/regulation-v37n4-7.pdf

This article is about smoking and taxes. Basically, as many here think, smoking has gotten down to the hard core. All the smokers who wanted to quit and were able to do so in other ways, cold turkey, NRT's, etc. are gone from the ranks of smokers. And while gov't has put forth the idea that by taxing smoking, one can increase public health - that argument, because of the make up of 'who's left', is becoming a moot point, so that any increases in taxes lose the 'public health' argument and what is left is the 'revenue enhancement' argument but it's still promoted as public health, which basically no longer applies.

Table 1 presents the results from our analysis. The top panel
reports estimates of the effect of cigarette taxes on the probability
that a person smokes or not. The bottom panel presents
estimates of the effect of cigarette taxes on the daily number of
cigarettes smoked.

Column 1 in the top panel lists the estimate of the association
between cigarette taxes and smoking participation for adults ages
18–74. The estimate is negative, close to 0 and not statistically
significant. The estimate from the Logistic regression is somewhat
difficult to interpret, so it is easier to focus on the elasticity,
which is listed in row 2. The elasticity measures the percentage
change in smoking in response to a 1 percent change in the tax.
The elasticity is –0.015, which is very small and not statistically
significant. It implies that a 100 percent increase in the cigarette
tax would decrease smoking among adults by 1.5 percent.


What this study has done is shown this to be the case where a percentage rise in taxes results in near negligible less smokers. And because of the income classes involved, that this regressive 'sin tax' hits the low income earners harder than anyone else - where they are spending some 14% of the income on cigarettes (in the less than $30,000 range) vs. 2% in the upper income ranges.

While not mentioning ecigs, this does show what most of us know and have seen happening - ecigs are the only thing that will now reduce the ranks of smokers - AND it will have a public health benefit - UNLESS ecigs are taxed as tobacco products.

 

[NorthOfAtlanta]

20 min well spent and saved with the other studies for future use.

 

[rolygate]

All mostly explained by the 20% Prevalence Rule. A lot of people out there don't get it. And it's the last thing that the tobacco control industry want anyone to know about. Carl Phillips has been pointing this out for years.

For 5 years between 2008 and 2013, smoking prevalence was static in the UK [at ~20%] and in fact the number of smokers rose slightly. After that, ecigs started to reduce smoking measurably. Do you think that the TCI were/are telling people about any of this - when they're busy chasing more funding?

tobacco control is about killing people for profit now.

 

[caramel]

The idea is that they can get away with huge taxes on all the inelastic demand - like cigarettes or gas.

In the past they were doing it as a "chimney tax" - since you couldn't give up on heating. Now they're somehow more refined - they vilify the target products (tobacco causes cancer, gas pollutes, etc) and apply a "sin" tax.

 

[Kent C]

The idea is that they can get away with huge taxes on all the inelastic demand - like cigarettes or gas.
In the past they were doing it as a "chimney tax" - since you couldn't give up on heating. Now they're somehow more refined - they vilify the target products (tobacco causes cancer, gas pollutes, etc) and apply a "sin" tax.

As an aside, with the lower price on gas, some are advocating an increase in the tax - attempting to claim 'less revenues' as a result of the lower price. This is an outright lie and anyone who knows the tax structure knows this. The difference here is that cigarette tax is a percentage, whereas the federal tax on gas is a straight 18.4 cents per gallon.

IOW, no mater what the price of gas is, the feds will get their 18.4 cents on every gallon sold - so there is no such 'decrease in revenues' because of price. In fact, with the price lower, there are likely MORE gallons being bought which raises their revenue. Just another lie - like the cigarette tax, but from another angle - for taxing gas. And sadly, there will be people who buy into that argument and perhaps even promote it as a 'good thing'

 

[DrMA]

Thanks, Kent. That was brilliant analysis by Cato Inst, and really quantifies what rolygate was saying:

«Tobacco control is about killing people for profit now.»

And I might add, that they've been doing killing for money from the first day they uttered anti-THR lies about 30 years ago.

To put this in perspective, Dr. Phillips estimates that 10-20K Americans were saved by Judge Leon from desk murder by FDA's attempt to ban vaping in 2009. So that's roughly 2.5-5K/year Over 10,000 more Americans get to ring in 2015 thanks to e-cigarettes | Anti-THR Lies and related topics

 

[Steamix]

Although smoking has declined, tax rakes have been stable or even slightly higher.

IMO, the 'public health' argument is a carefully cultivated sham. Balancing it for maximum take is what it's all about.

And it all worked well till vaping came round the bend. Patches, gums, drugs, seminars, all with their abysmal effeciency ratings... wasn't really a threat.

Vaping...now thats like holy water to the devil...

 

[DrMA]

Although smoking has declined, tax rakes have been stable or even slightly higher.

IMO, the 'public health' argument is a carefully cultivated sham. Balancing it for maximum take is what it's all about.

And it all worked well till vaping came round the bend. Patches, gums, drugs, seminars, all with their abysmal effeciency ratings... wasn't really a threat.

Vaping...now thats like holy water to the devil...

NRT have ZERO effectiveness long-term
Impact of over-the-counter sales on effectiveness of pharmaceutical... - PubMed - NCBI

 

[Bill Godshall]

While I admire many things CATO has done, this is a junk science study.

While the authors claim their experiment resulted in a price elasticity of -.06 for cigarettes (i.e. a 10% price hike would result in a .6% consumption decline), Wells Fargo's Bonnie Herzog recently estimated that the price elasticity for cigarettes had increased from about -.4 (which is what a consensus of economists have traditionally considered accurate) to about -.6 due primarily to increased competition by e-cigarettes.

 

[Kent C]

While I admire many things CATO has done, this is a junk science study.

While the authors claim their experiment resulted in a price elasticity of -.06 for cigarettes (i.e. a 10% price hike would result in a .6% consumption decline), Wells Fargo's Bonnie Herzog recently estimated that the price elasticity for cigarettes had increased from about -.4 (which is what a consensus of economists have traditionally considered accurate) to about -.6 due primarily to increased competition by e-cigarettes.

Comparing apples to oranges.

The context is different than Herzog's who is looking at the whole market.

"To conduct our analysis, we focused on states with recent large cigarette
tax increases. Specifically, we selected 19 states enacting 22
of the largest tax increases during the period covered by our data.
The decision to focus on large tax increases is motivated by the
simple argument that changes in consumption should be greatest
for the largest tax increases. Focusing on large tax increases is also
advantageous from an empirical standpoint because larger effects
are easier to detect reliably than smaller effects."

Nothing 'junky' about that. Many studies concentrate on sub groups. Sometimes to catch a trend.

The main point is that any further tax on cigarettes is not going to have the 'intended effect' of reducing smoking anymore - something with which Herzog evidently agrees. Whether it's the fact that we're now down to the hardcore smokers, or whether it's a result of competition from ecigs (or both) may be interesting but doesn't effect the study's results.

Regardless, that isn't going to stop 'smoke free' tobacco control groups from advocating taxes on cigarettes or apparently, ecigs. It's part of why they exist.

 

[DrMA]

Those cheeky smokers must be punished for having the gall to quit. How else would you replace the lost tobacco income if not by taxing the cure?

PS: Kent -0.06 is not the same as -0.60

 

[Kent C]

Those cheeky smokers must be punished for having the gall to quit. How else would you replace the lost tobacco income if not by taxing the cure?

PS: Kent -0.06 is not the same as -0.60

Thanks.... edited....