Panel Paper: The Effect of e-Cigarette Taxes on Tobacco Product Use Among Adults

Saturday, November 9, 2019
I.M Pei Tower: Majestic Level, Majestic Ballroom (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Catherine Maclean, Temple University, Charles Courtemanche, University of Kentucky and Michael F. Pesko, Georgia State University

Smoking is the leading cause of preventable disease and death in the U.S. E-cigarettes are relatively new products in tobacco markets. Use of e-cigarettes has surged since their entry into the U.S. tobacco market in 2007. Indeed, as of 2017, 15.5% of U.S. adults have used these products. However, the extent to which e-cigarette use will help or harm public health is unclear. The available clinical evidence suggests that e-cigarettes are substantially less harmful than tobacco cigarettes and can be used for cessation purposes. Many public health advocates claim, however, that e-cigarettes will act as a gateway to smoking and that these products are much more harmful than the clinical literature suggests. Given this background, U.S. state and local policymakers have approached the rapid growth of e-cigarette use (‘vaping’) skeptically and have passed numerous e-cigarette regulations including taxes. Policymakers argue that these regulations will reduce e-cigarette use and, in turn, improve public health. These regulatory actions imply that state and local policymakers believe e-cigarette use is harmful with minimal cessation or harm reduction potential.

However, until very recently, there has been little exogenous policy variation and real-world data on e-cigarette consumption to allow quantification of the hypothesized relationship between e-cigarette taxes and use of these products. Further, the extent to which e-cigarette taxes may influence tobacco cigarette smoking and/or dual use of tobacco cigarettes and e-cigarettes is largely unknown. This dearth of evidence is troubling given the complex and heterogeneous reasons consumers use e-cigarettes. For example, if e-cigarettes are effectively used by smokers to quit tobacco entirely or to consume nicotine (the addictive ingredient in tobacco products) in a less harmful manner, then policies that curtail e-cigarette use, such as taxes, may lead to increased smoking and worse public health. On the other hand, if e-cigarettes are used to circumvent smoking bans, deter cessation, and/or promote smoking through gateway effects, for example, then taxes may improve public health.

In this study we provide new, timely, and important evidence on the effects of e-cigarette taxes among adults. To do so, we combine two large-scale restricted-use survey datasets – the Behavioral Risk Factor Surveillance Survey 2016-2017 and the National Health Interview Survey 2015-2017 – with data on state and local e-cigarette taxes adopted in 11 states and DC. Using differences-in-differences style models that control for wide-range of individual-level and state-level factors, we estimate the effect of e-cigarette taxes on e-cigarette use, tobacco cigarette use, and dual use of these products among adults. Our findings suggest that e-cigarette taxes reduce vaping and increase tobacco cigarette smoking. There is heterogeneity in e-cigarette price-elasticity and cross-price elasticity: effects are largest among men and younger adults. In an extension, we also show that increased tobacco cigarette taxes increase e-cigarette use.

Our findings suggest that e-cigarettes and tobacco cigarettes are substitutes. Thus, policies that are aimed to curtail e-cigarette or tobacco cigarette use may have the unintended consequence of increasing use of the substitute product. Policymakers must consider the complex relationships between these products when implementing regulations.

Full Paper: