Study Says Durbin’s Tax Parity Bill Would Increase Youth Smoking

A new paper by a group of economics and health policy researchers finds that a law forcing all nicotine products to be taxed at the same rate would cause increased smoking and would damage rather than improve public health.

A law that would do exactly that was proposed earlier this year by Illinois Senator Dick Durbin—the Tobacco Tax Equity Act (S 1314), based on previously introduced Durbin tobacco tax parity bills. An identical House bill (HR 2786) was introduced at the same time by Illinois Representative Raja Krishnamoorthi. Both members of Congress are Democrats, and longtime opponents of vaping and tobacco harm reduction.

The Tobacco Tax Equity Act would double the federal tax on cigarettes, and apply the same tax rate to all other consumer nicotine products, with annual increases based on inflation. The tax on vaping products would be determined later by the Treasury Department. There is currently no federal tax on e-cigarettes or e-liquid.

The new working paper, published by the National Bureau of Economic Research (NBER), suggests that doubling the rate of state and local e-cigarette taxes would reduce youth vaping barely more than it would increase youth smoking. The effect wouldn’t be nearly large enough to provide a health dividend, considering that vaping is the clearly less harmful practice. And the tax created by the Durbin bill would likely be much larger than a doubling of existing state and local taxes.

Descriptive evidence suggests that higher youth #ecig use may be causing rapidly declining youth #cigarette use.

In a decade with wide #ecig availability, #healthypeople 2020 objectives for youth #cigarette use declines were surpassed by 386% of the original goal.

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— Michael F. Pesko (@mikepesko) August 31, 2021

“If ENDS are substantially safer products as suggested by several major government-commissioned reviews,” write the working paper’s authors, “our results suggest that the proposed bill may harm youth health in the United States.”

The results align with recommendations in a recent paper co-authored by 15 former presidents of the Society for Research on Nicotine and Tobacco. Those tobacco control leaders suggest that taxing cigarettes “heavily” and vaping products “modestly” would “encourage adult smokers to quit smoking or to switch to less expensive e-cigarettes,” and discourage vaping uptake by adolescents.

The NBER paper’s authors modeled the effects of increased vaping product taxes on cigarette and vaping product usage, on sources of youth vaping product purchases, and on youths’ perceived risk of vaping. They used 2011-2019 data from the University of Michigan/National Institute on Drug Abuse (NIDA) Monitoring the Future survey and the Centers for Disease Control and Prevention (CDC) Youth Risk Behavior Surveillance System survey.

The results show a large substitution effect when e-cigarette taxes are increased; youth buy more combustible cigarettes instead of lower-risk vaping products. The results match previous studies showing that increasing taxes on either cigarettes or vaping products increases sales of the other. Previous research shows that this result bears out for adults, pregnant women, youth, and the overall population. The products are economic substitutes: when either cigarettes or vaping products are more expensive, a significant number of people will switch to the other.

We estimate continuous-treatment DD models to find that #ecig taxes reduce ecig use & raise #cigarette use.

Doubling existing #ecig taxes would reduce youth use by 12% but raise current #cigarette use by 8%, with particularly large increases for regular #cigarette users.

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— Michael F. Pesko (@mikepesko) August 31, 2021