The Volokh Conspiracy

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New Study: Tax E-cigarettes, Increase Smoking

Another empirical study finds a substitution effect between vaping and smoking

|The Volokh Conspiracy |

A new study from the National Bureau of Economic Research examines the effects of Minnesota's decision to tax e-cigarettes like tobacco cigarettes. Here is the abstract:

E-cigarettes use a battery powered heater to turn a liquid containing nicotine into a vapor. The vapor is inhaled by the user and is generally considered to be less harmful than the smoke from combustible cigarettes because the vapor does not contain the toxins that are found in tobacco smoke. Because e-cigarettes provide an experience that is very similar to smoking, they may be effective in helping smokers to quit, and thus the availability of e-cigarettes could increase quit rates. Alternatively, e-cigarettes may provide smokers with a method of bypassing smoking restrictions and prolong the smoking habit. There is very little causal evidence to date on how e-cigarette use impacts smoking cessation among adults. Although there is no federal tax on e-cigarettes, a few states have recently imposed heavy taxes on them. We provide some of the first evidence on how e-cigarette taxes impact adult smokers, exploiting the large tax increase in Minnesota. That state was the first to impose a tax on e-cigarettes by extending the definition of tobacco products to include e-cigarettes. This tax, which is 95% of the wholesale price, provides a plausibly exogenous deterrent to e-cigarette use. We utilize data from the Current Population Survey Tobacco Use Supplements from 1992 to 2015, in conjunction with a synthetic control difference-in-differences approach. We assess how this large tax increase impacted smoking cessation among adult smokers. Estimates suggest that the e-cigarette tax increased adult smoking and reduced smoking cessation in Minnesota, relative to the control group, and imply a cross elasticity of current smoking participation with respect to e-cigarette prices of 0.13. Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level about 1.8 million smokers would be deterred from quitting in a ten year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period. The public health benefits of not taxing e-cigarettes, however, must be weighed against effects of this decision on efforts to reduce vaping by youth.

(Emphases added.)

This study is consistent with prior research finding that restrictions on youth access to e-cigarettes increases teen smoking rates.

It is becoming increasingly difficult for public health advocates and others to deny that burdening access to e-cigarettes, relative to smoking, results in higher smoking rates than we would have seen otherwise. So unless one believes the risks of e-cigarettes are anything near to those of combustible cigarettes, such policy measures have deadly consequences.