Cigarette taxes are a disproportionate burden to the poor: (study)

A recent study documented the distributional effects of New York's high cigarette taxes. The results are staggering: low income New Yorkers now spend nearly a quarter of their income on cigarettes.
Published on September 24, 2012

Cigarettes are unhealthy. No one disputes this point. In order to dissuade people from smoking, many jurisdictions have high taxes on cigarettes. Such is the case with every Canadian province. But while smoking has declined as excise taxes have increased (note: correlation does not imply causation), these taxes have disproportionately harmed the poor. A recent study commissioned by the New York State Government documented the distributional effects of New York’s high cigarette taxes. The results are staggering: low income New Yorkers now spend nearly a quarter of their income on cigarettes. The national average is under fifteen percent. The rate of smoking is lower in New York (16.1 percent) than the national average (22.2 percent), though there are a plethora of factors that influence the geographical distribution of smokers.

While cigarette taxes almost certainly have a deterrent effect on smoking, it is likely not as strong as believed. Otherwise people wouldn’t be willing to spend a quarter of their income to smoke. The study pointed out that there has been no noticeable decline in smoking among low income people in the state since taxes were increased in 2003. Other factors are likely more important. For instance, people with higher levels of formal education are far less likely to smoke. Higher income levels are also strongly correlated with lower rates of smoking. It just so happens that New York is a wealthy state with high levels of post-secondary education.

Even if the excise tax rates account for half of the differential, garnishing an additional ten percent of low income smokers wages to reduce the rate of smoking by three percent does not seem like a reasonable trade-off.

 

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