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The Effect of Cigarette Taxation on Prices

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  • Ryan S. Sullivan
  • Donald H. Dutkowsky

Abstract

This article combines new, author-collected tax data with data both from the American Chamber of Commerce Researchers Association cost of living index and from the Tax Burden on Tobacco to measure the relative effects of city, county, and state excise cigarette taxation on cigarette prices. The results indicate that a $1 increase in the state excise cigarette tax increases cigarette prices between $1.10 and $1.14, but that a $1 increase in a city- or county-level excise tax increases prices by $1.07. These findings are similar between premium and generic cigarette brands. Additionally, urban areas located near states with lower cigarette taxes tend to have lower cigarette prices relative to urban areas located near states with the same or higher tax rates.

Suggested Citation

  • Ryan S. Sullivan & Donald H. Dutkowsky, 2012. "The Effect of Cigarette Taxation on Prices," Public Finance Review, , vol. 40(6), pages 687-711, November.
  • Handle: RePEc:sae:pubfin:v:40:y:2012:i:6:p:687-711
    DOI: 10.1177/1091142112442742
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    References listed on IDEAS

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    Cited by:

    1. Lance S. Ballester & Amy H. Auchincloss & Lucy F. Robinson & Stephanie L. Mayne, 2017. "Exploring Impacts of Taxes and Hospitality Bans on Cigarette Prices and Smoking Prevalence Using a Large Dataset of Cigarette Prices at Stores 2001–2011, USA," IJERPH, MDPI, vol. 14(3), pages 1-15, March.
    2. Christopher S. Carpenter & Michael T. Mathes, 2016. "New Evidence on the Price Effects of Cigarette Tax Competition," Public Finance Review, , vol. 44(3), pages 291-310, May.
    3. James E. Prieger & Jonathan Kulick, 2018. "Cigarette Taxes And Illicit Trade In Europe," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1706-1723, July.
    4. Serhan Cevik, 2018. "Smoke screen: Estimating the tax pass‐through to cigarette prices in Pakistan," Review of Development Economics, Wiley Blackwell, vol. 22(3), pages 1-15, August.
    5. Hyunchul Kim & Dongwon Lee, 2021. "Racial demographics and cigarette tax shifting: evidence from scanner data," Empirical Economics, Springer, vol. 61(2), pages 1011-1037, August.
    6. 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.
    7. 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.
    8. Pereda, Paula & Garcia, Carolina Policarpo, 2020. "Price impact of taxes on sugary drinks in Brazil," Economics & Human Biology, Elsevier, vol. 39(C).
    9. Andrew Hanson & Ryan Sullivan, 2016. "Incidence and Salience of Alcohol Taxes," Public Finance Review, , vol. 44(3), pages 344-369, May.
    10. Caitlan Russell & Corne van Walbeek, 2016. "How does a Change in the Excise Tax on Beer Impact Beer Retail Prices in South Africa?," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 555-573, December.
    11. Wenjing Li & John E. Anderson & James R. Schmidt, 2020. "The effect of deed taxes on real estate prices in China," Asia-Pacific Journal of Regional Science, Springer, vol. 4(2), pages 317-341, June.
    12. Paula Carvalho Pereda & Carolina Policarpo Garcia, 2021. "Price impact of taxes on sugary drinks in Brazil," Working Papers, Department of Economics 2021_06, University of São Paulo (FEA-USP).

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