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The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data

Author

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  • Hanson, Andrew
  • Sullivan, Ryan

Abstract

This paper uses a recent increase in Wisconsin’s tobacco tax as a natural experiment to measure the economic incidence of tobacco taxation, using micro-level data on cigarette prices from retail locations in Wisconsin and states that share its border. We find that Wisconsin’s $1 tobacco tax increase was over-shifted to consumers; they pay the entire amount of the tax as well as a premium of between 8–17 cents per pack of cigarettes. We also use geo-coded data to test if the incidence of the tobacco tax is different for locations near the border of states with different tobacco taxation.

Suggested Citation

  • Hanson, Andrew & Sullivan, Ryan, 2009. "The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(4), pages 677-698, December.
  • Handle: RePEc:ntj:journl:v:62:y:2009:i:4:p:677-98
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    Cited by:

    1. Morone, Andrea & Nemore, Francesco, 2015. "Tax salience: an experimental investigation," MPRA Paper 63814, University Library of Munich, Germany.
    2. repec:taf:applec:v:48:y:2016:i:41:p:3976-3994 is not listed on IDEAS
    3. Bishop, James, 2015. "Interacting effects of state cigarette taxes on smoking participation," MPRA Paper 66609, University Library of Munich, Germany.
    4. Nicoletta Berardi & Patrick Sevestre & Marine Tépaut & Alexandre Vigneron, 2016. "The impact of a ‘soda tax’ on prices: evidence from French micro data," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3976-3994, September.
    5. Philip DeCicca & Donald Kenkel & Feng Liu, 2013. "Who Pays Cigarette Taxes? The Impact of Consumer Price Search," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 516-529, May.
    6. Lesley Chiou & Erich Muehlegger, 2014. "Consumer Response to Cigarette Excise Tax Changes," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(3), pages 621-650, September.
    7. Morone, Andrea & Nemore, Francesco & Nuzzo, Simone, 2016. "Experimental Evidence on Tax Salience and Tax Incidence," MPRA Paper 74319, University Library of Munich, Germany.
    8. Donald H. Dutkowsky & Ryan S. Sullivan, 2014. "Excise Taxes, Consumer Demand, Over-Shifting, and Tax Revenue," Public Budgeting & Finance, Wiley Blackwell, vol. 34(3), pages 111-125, September.
    9. Hansen, Benjamin & Sabia, Joseph J. & Rees, Daniel I., 2011. "Cigarette Taxes and the Social Market," IZA Discussion Papers 5580, Institute for the Study of Labor (IZA).
    10. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
    11. Caitlan Russell & Corne van Walbeek, 2016. "How does a change in the excise tax on beer impact beer retail prices in South Africa?," SALDRU Working Papers 162, Southern Africa Labour and Development Research Unit, University of Cape Town.
    12. Benjamin Hansen & Daniel I. Rees & Joseph J. Sabia, 2013. "Cigarette Taxes and How Youths Obtain Cigarettes," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 371-394, June.
    13. Bonnet, Céline & Réquillart, Vincent, 2013. "Tax incidence with strategic firms in the soft drink market," Journal of Public Economics, Elsevier, vol. 106(C), pages 77-88.
    14. Finkelstein, Eric A. & Zhen, Chen & Bilger, Marcel & Nonnemaker, James & Farooqui, Assad M. & Todd, Jessica E., 2013. "Implications of a sugar-sweetened beverage (SSB) tax when substitutions to non-beverage items are considered," Journal of Health Economics, Elsevier, vol. 32(1), pages 219-239.
    15. repec:eee:respol:v:47:y:2018:i:5:p:854-871 is not listed on IDEAS
    16. Don Fullerton & Erich Muehlegger, 2017. "Who Bears the Economic Costs of Environmental Regulations?," CESifo Working Paper Series 6596, CESifo Group Munich.
    17. James C. Cox & Mark Rider & Astha Sen, 2012. "Tax Incidence: Do Institutions Matter? An Experimental Study," Experimental Economics Center Working Paper Series 2012-17, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Feb 2017.
    18. Philip DeCicca & Donald Kenkel & Feng Liu, 2015. "Reservation Prices: An Economic Analysis of Cigarette Purchases on Indian Reservations," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(1), pages 93-118, March.
    19. Youssef Benzarti & Dorian Carloni, 2017. "Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France," NBER Working Papers 23848, National Bureau of Economic Research, Inc.
    20. David R. Agrawal, 2015. "The Tax Gradient: Spatial Aspects of Fiscal Competition," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 1-29, May.
    21. repec:bla:sajeco:v:84:y:2016:i:4:p:555-573 is not listed on IDEAS
    22. Philip DeCicca & Donald S. Kenkel & Feng Liu, 2014. "Reservation Prices: An Economic Analysis of Cigarette Purchases on Indian Reservations," NBER Working Papers 20778, National Bureau of Economic Research, Inc.

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