Price isn't everything behavioral response around changes in sin taxes Alex Rees-Jones and Kyle Rozema
By: Rees Jones, Alex
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Contributor(s): Rozema, Kyle.
Material type: 
ArticleSubject(s): PRECIOS | IMPUESTOS ESPECIALES | TABACO | BEBIDAS ALCOHOLICAS | MODELOS ECONOMETRICOS
In:
National Tax Journal v. 76, n. 1, March 2023, p. 4-35Summary: In traditional economic models, taxes change behavior by changing prices. In empirical analyses, factors other than price are thought to be relevant, but any nonprice factors are usually assumed to be held constant as taxes vary. We contend that violations of this assumption are expected when laws are passed changing sin taxes. In support of this claim, we document that state-level cigarette tax increases are concomitant with increases in antismoking appropriations, media coverage on smoking, lobbying efforts, and place-based smoking restrictions. The influence of these nonprice factors is easily confused with price effects, and we find evidence suggesting that controlling for them substantially reduces the estimated demand responsivity to the tax itself.
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In traditional economic models, taxes change behavior by changing prices. In empirical analyses, factors other than price are thought to be relevant, but any nonprice factors are usually assumed to be held constant as taxes vary. We contend that violations of this assumption are expected when laws are passed changing sin taxes. In support of this claim, we document that state-level cigarette tax increases are concomitant with increases in antismoking appropriations, media coverage on smoking, lobbying efforts, and place-based smoking restrictions. The influence of these nonprice factors is easily confused with price effects, and we find evidence suggesting that controlling for them substantially reduces the estimated demand responsivity to the tax itself.
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