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- Cigarettes continue to kill nearly 480,000 Americans each year, and several reviews support the conclusion that e-cigarettes contain fewer toxicants and are safer for non-pregnant adults than cigarettes. Our results suggest that e-cigarettes are elastic goods and their use substantially reduces cigarette sales.
- Despite potentially detrimental unintended consequences of e-cigarette taxes, between the end of our study period (December 2017) and December 2020, 20 additional states enacted e-cigarette taxes, bringing the total to 28.
- We find robust evidence that e-cigarette taxes are over-shifted to consumers. Our results here suggest that state-level e-cigarette taxes are passed through to prices at a higher level than e-cigarette taxes enacted at the sub-state level.
- Here, a 1% increase in cigarette taxes reduces cigarette sales while a 1% increase in e-cigarette taxes increases cigarette sales.
- In late February 2020, the U.S. House of Representatives approved a national e-cigarette tax proportional to the federal cigarette tax (House Bill 2339 2020). The bill specifies a tax rate of $50.33 per 1,810 milligrams of nicotine (or $0.028 per milligram). JUUL pods at the time of writing contain 59 milligrams/ml (at 5% nicotine volume). Assuming this conversion, we simulate that, if this bill were to become law, the tax could raise e-cigarette prices by $2.36 per ml ($0.0278 x 59 x 1.44 using Table 3), would reduce NRSD e-cigarette purchases by 1,784 ml per 100,000 adults , and would increase NRSD cigarette pack purchases by 26,736 packs per 100,000 adults. Our rate of substitution would be halved when compensating for the NRSD capturing roughly twice the share of cigarette sales than e-cigarette sales, which brings us to a substitution rate of one pod = 7.5 packs.
- A limitation of our study is the reliance on e-cigarettes sold through retail stores, so we cannot capture e-cigarettes sold through specialty vape shops and online. However, e-cigarette taxes are collected for both online and vape shop purchases in the same way they are collected in retail stores, so we are unaware of any financial incentive to change shopping venue in response to an e-cigarette tax.