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Cigarette Tax Avoidance Behavior and Cessation Analyses in Disparate Populations

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Project Summary:

In recent years, most states have raised cigarette taxes to discourage smoking and to increase tax revenue. The tax increase widened price differentials among states, resulting in proliferation of low/untaxed cigarette retail outlets on the Web and on Indian Reservations, and discount cigarettes represent about one-quarter of today’s market share compared to being non-existent 20 years ago. Some evidence suggests that, in response to increases in cigarette prices and taxes, price-sensitive smokers may switch to discount/generic brands or purchase low/untaxed cigarettes to continue cigarette consumption, which may weaken the effect higher prices have on cessation and may result in uncollected tax revenue for state governments. Relatively little work has been done to examine these factors, and even less has focused on important population subgroups such as low-socioeconomic-status smokers or minority races that often bear the largest burden of tobacco-attributable diseases. The goal of this study is to better understand (1) how different populations of smokers respond to higher cigarette prices, with a focus on changes in purchase patterns to avoid paying cigarette taxes; and (2) how this behavior may influence smoking cessation. The partner grant “Low/Untaxed Cigarettes: Who Uses Them? Does It Decrease Cessation? How Much Does It Cost Taxpayers?” aims to study these factors in a general, descriptive manner; however, this project will allow for a careful analysis within multiple disparate population subsets and a thorough comparison across groups. To fulfill this goal, four prospective tobacco use data sources at the local, state, and national levels will be analyzed to provide a comprehensive investigation of tax avoidance behavior and smoking cessation in disparate populations, including those with low income, low education, no insurance, and minority race/ethnicity. Furthermore, this study will expand the partner grant by investigating other sources of cheaper cigarettes. For example, we will include studies of independent cigarette sellers that were not proposed in the partner grant, and we will expand the study of discount cigarettes proposed in the partner grant by examining brand switching to or from discount cigarettes with longitudinal data. In addition, we will construct a cigarette demand model for the time period between 1980 and 2005 with aggregate-level data to estimate revenue loss or gain from tax avoidance behaviors by state and by fiscal year. This will complement our individual-level analyses from survey data proposed in the partner grant to better understand how these two types of data are related.



 
   
 
 
     
   
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