Where Economics and Health Intersect: Taxes on E-Cigs Hurt Attempts to Quit Smoking

Daniel Dench
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There is very little causal evidence to date on how e-cigarette use impacts smoking cessation among adults. In a paper published in June, 2020, Georgia Tech economist Daniel Dench probed the role that price plays in choosing whether to vape or smoke.  E-cigarettes provide nicotine in a vapor form, which is considered less harmful than the smoke from combustible tobacco because it does not contain the same toxins. Vaping is believed to act as a bridge to quitting smoking.  

Daniel DenchDench joined the Georgia Tech School of Economics in August, 2020, coming from City University of New York and the National Bureau of Economics Research. He and co-authors Henry Saffer, Michael Grossman and Dhaval Dave, published the study, “E-cigarettes and adult smoking: Evidence from Minnesota,” in Journal of Risk and Uncertainty, Vol. 60, No. 3, 2020. Using data from 1992-2015, the researchers focused on Minnesota because that state was the first to impose a tax on vapor products that raised the price by $1.50 to $2 per e-cigarette.  

The study asked, would smokers balk at the higher price and revert to tobacco after having quit cigarettes? And would the health of the Minnesota smoking population decline? Estimates suggested that the large Minnesota e-cigarette tax increased adult tobacco smoking and reduced smoking cessation in Minnesota, as compared to other states. Dench emphasized this point in conversation. He may agree to take it out when he reviews it.  

The public health implications of this research are not small. If the cost of e-cigs increased by 10 percent, says Dench, tobacco smoking participation would increase by 1.3 percent, and about 32,400 additional adults in Minnesota would take up smoking again. Further, if this tax were imposed on a national level, about 1.8 million smokers would be deterred from quitting over a ten-year period. 

Taxing vape products at the same rate as cigarettes would deter more than 2.75 million smokers nationally from quitting in the same period, the study found. 

Thus, e-cigs have a strong economic component to their use, and policy makers should give this finding consideration.  Dench says, “I would say that policy makers need to consider how a tax on e-cigs will affect adults’ ability to quit smoking and weigh this negative impact against how it might deter teenagers’ from using tobacco.” 

Read the full paper

By Gita Smith