The Effects of Traditional Cigarette and E-Cigarette Taxes on Adult Tobacco Product Use

Bottom Line: Higher cigarette taxes reduce adult cigarette use and increase adult e-cigarette use, suggesting that the products are economic substitutes. E-cigarette tax adoption reduces e-cigarette use and may increase traditional cigarette use. This finding implies that policymakers attempting to develop an overall tobacco control strategy that involves targeting both traditional cigarettes and e-cigarettes should carefully consider spillovers from one policy to another.

As of 2017, 34.4 million adults (14.0%) in the United States smoked traditional cigarettes and 6.9 million (2.8%) used e-cigarettes. E-cigarettes may represent a healthier alternative to traditional cigarettes for smokers who cannot quit by delivering nicotine without carcinogens and other toxicants found in traditional cigarettes. The U.S. Surgeon General has concluded that, while e-cigarettes are not harmless, these products contain fewer toxicants than traditional cigarettes.

This study concludes that a $1 traditional cigarette excise tax increase also increases current vaping by 0.3 ppts and everyday vaping by 0.1 ppts. Meanwhile, the adoption of an e-cigarette tax leads to a 0.2 ppts reduction in vaping.

This report has several key findings: 

1. Traditional cigarette taxes reduce smoking among adults over the period of 2011 to 2017.
2. Traditional cigarette taxes increase e-cigarette use among adults, suggesting that the products are economic substitutes.
3. Evidence suggests that e-cigarette taxes reduce e-cigarette use, particularly for males.
4. The introduction of an e-cigarette tax appears to reduce traditional cigarette tax responses. This could be because increasing the price of e-cigarettes disincentivizes smokers from trying to quit by using e-cigarettes as a smoking cessation device or transitioning to e-cigarettes as a source of nicotine when faced with a traditional cigarette tax rate increase. 

Read the full paper here.