Taxing Tobacco and E-Cigarettes at Same Rate Will Harm Young Users, New Study Finds

ATLANTA—A National Institutes of Health-funded study by nine health economists, including Georgia State University’s Michael Pesko, suggests the Tobacco Tax Equity Act of 2021 before Congress may not benefit public health – particularly among youth – because it is likely to induce substitution towards more lethal combustible tobacco products.

Averaging effects across the two data sources, the authors simulate that doubling the rate of e-cigarette taxes used by state and local governments would reduce youth e-cigarette use by 12 percent while increasing youth cigarette use by 8 percent.

The new bill seeks to double the federal cigarette excise tax to $2.01 per pack and apply that same rate across all tobacco products, including e-cigarettes. If it passes, electronic cigarettes would be subject to federal taxes for the first time and at the same rate as traditional tobacco products. Yet the National Academies of Sciences, Engineering and Sciences has reported e-cigarettes contain fewer and lower levels of toxicants than combustible tobacco products, raising questions about whether tobacco products should be taxed equally when some are more lethal than others.

“We should tax cigarettes, a more lethal product, significantly more,” Pesko said.

Using large-scale survey data of youth from Monitoring the Future and the Youth Risk Behavior Surveillance System – 800,000 observations from 2011 to 2019 – the economists developed models to estimate the effect of e-cigarette taxes on four outcomes: e-cigarette use, combustible tobacco use, source of e-cigarettes (for example, purchasing online, purchasing from brick-and-mortar retailers) and perceived risk of e-cigarette use.

“A recent survey of experts found that they believe e-cigarettes to be 33 percent of the risk of cigarettes, so reducing e-cigarette use by significantly raising cigarette use is not a good trade and will likely cause overall harm to public health,” Pesko said.

These findings – showing large substitution towards cigarettes as a result of e-cigarette taxes – matches those from studies of other populations, including adults and pregnant women.

Co-authors of the study, “Intended and Unintended Effects of E-cigarette Taxes on Youth Tobacco Use” are Rahi Abouk (William Paterson University), Charles Courtemanche (University of Kentucky), Dhaval Dave (Bentley University), Bo Feng (Georgia State University), Abigail S. Friedman (Yale University School of Public Health), Johanna Catherine Maclean (Temple University), and Joseph Sabia and Samuel Stafford (San Diego State University). Download a copy at https://cheps.sdsu.edu/docs/e-cig-taxes-cheps-working-paper.pdf.

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