The effects of traditional cigarette and e-cigarette tax rates on adult tobacco product use


We study the effects of traditional cigarette and e-cigarette taxes on use of these products among adults in the United States. Data are drawn from the Behavioral Risk Factor Surveillance System and National Health Interview Survey over the period 2011 to 2018. Using two-way fixed effects models, we find evidence that higher traditional cigarette tax rates reduce adult traditional cigarette use and increase adult e-cigarette use. Similarly, we find that higher e-cigarette tax rates increase traditional cigarette use and reduce e-cigarette use. Cross-tax effects imply that the products are economic substitutes. Our results suggest that a proposed national e-cigarette tax of $1.65 per milliliter of vaping liquid would raise the proportion of adults who smoke cigarettes daily by approximately 1 percentage point, translating to 2.5 million extra adult daily smokers compared to the counterfactual of not having the tax.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6


  1. 1.

    Throughout the paper, we refer to the act of smoking as exclusive to traditional cigarette use. We refer to the act of vaping as consuming nicotine-containing e-cigarettes. E-cigarettes are also referred to as e-cigs, e-hookahs, electronic nicotine delivery systems (ENDS), vape pens, and vapes. There are (broadly) three types of e-cigarettes: (1) disposable single-use products, (2) kits that include a rechargeable device and cartridges containing liquid nicotine, and (3) tank or pod systems used to vaporize liquid nicotine. In this paper, we follow the U.S. Surgeon General’s convention in referring to all of these products as e-cigarettes (U.S. Department of Health and Human Services 2016).

  2. 2.

    There is also a literature on the effects of various e-cigarette policies—particularly minimum age laws—on youth smoking (Dave et al. 2019; Friedman 2015; Pesko and Currie 2019; Pesko et al. 2016a).

  3. 3.

    While tax rates are arguably not as directly determined by demand as prices, they are nonetheless established within the state’s political economy and thus not purely exogenous (Besley and Case 2000).

  4. 4.

    Though our focus here is on prime age adults, we note that there is also a literature using quasi-experimental methods to estimate the tax elasticity of demand for traditional cigarettes among youth (DeCicca et al. 2002; Carpenter and Cook 2008; Hansen et al. 2017; Courtemanche and Feng 2018) and older adults (DeCicca and McLeod 2008; Maclean et al. 2016).

  5. 5.

    These prices include excise taxes but do not include sales taxes.

  6. 6.

    Additionally, several studies evaluate the effect of e-cigarette price variation on sales or use of e-cigarettes and/or traditional cigarettes (Huang et al. 2018; Zheng et al. 2017; Stoklosa et al. 2016; Pesko and Warman 2017; Pesko et al. 2018; Cantrell et al. 2019; Saffer et al. 2018; Marti et al. 2019; Pesko et al. b). All of these studies, with the exception of Cantrell et al. (2019), show that e-cigarette sales or use declines following a price or tax increase. Several studies provide evidence that traditional cigarettes and e-cigarettes are economic substitutes (Zheng et al. 2017; Stoklosa et al. 2016; Pesko and Warman 2017; Cantrell et al. 2019), with none finding evidence to support the hypothesis that the two products are economic complements.

  7. 7.

    Two other studies find a negative association between e-cigarette tax adoption and e-cigarette use using at most two waves of BRFSS data (Jun and Kim 2020; Du et al. 2020). However, these studies do not control for locality or time fixed effects and hence omitted variable bias is likely.

  8. 8.

    We begin our study period in 2011 due to a change in the BRFSS survey frame. Prior to 2011, the BRFSS, a telephone survey, conducted surveys using landlines. Beginning in 2011, cellphones were added to the survey frame to better capture a sample that represented the U.S. population. This change in survey frame led to a compositional shift in survey respondents, and thus we follow CDC recommendations and do not combine pre- and post-2011 data. In addition, the focus on relatively recent years enables us to isolate the period in which e-cigarettes were widely available in U.S. tobacco product markets, which is our main contribution to the traditional cigarette tax elasticity literature.

  9. 9.

    The public use BRFSS includes geographic information on states but not sub-state localities. The finest geographic area recorded in the public use NHIS is the region.

  10. 10.

    E-cigarette use questions were part of the core module fielded in all states in 2016 and 2017 and were part of an optional module fielded in 32 states in 2018.

  11. 11.

    This variable is included to control for differences in survey design. For instance, the BRFSS is a telephone survey while the NHIS is a face-to-face survey.

  12. 12.

    Both Chicago and Cook County have adopted an e-cigarette tax. We assume that the earlier tax in Chicago affects all of Cook County, since we cannot separate Chicago residents from residents of the rest of Cook County in our data.

  13. 13.

    The American Non-Smokers Rights Foundation tracks when municipalities, counties, and states pass indoor air laws for vaping or smoking in different venues. These comprehensive data have been used in several papers (McGeary et al. 2020; Abouk and Adams 2017; Cotti et al. 2018). We use this information to create two separate measures for the share of the population in each county covered by indoor smoking and indoor vaping restrictions for private workplaces, restaurants, or bars. We weight laws applying to bars, restaurants, and private workplaces equally. For indoor smoking restrictions, we also consider laws applying to only part of the establishment (but not the full establishment) with ½ weight. Partial laws are uncommon for indoor vaping restrictions.

  14. 14.

    We thank Rosalie Pacula for sharing an updated version of the marijuana decriminalization variable with us.

  15. 15.

    Fourteen states passed a cigarette excise tax increase of ≥ $0.50 during the study period, and no states passed more than two such increases. Due to local taxes, both Cook County and Philadelphia County had more than one $0.50 excise tax increase. In those cases, we use the first large tax increase to define the ‘event’ in our event study.

  16. 16.

    Data is only available through 2017 as of the writing of this paper; therefore, we use 2017 SEER values for 2018 weights. Details available on request.

  17. 17.

    For current smoking, we use the traditional cigarette tax coefficient estimated listed in the first column of Table 2 (−0.0012), multiply this number by the average traditional cigarette tax for adopting localities ($1.51 from Table 1), and then divide this product by the average traditional cigarette use for adopting localities (0.156 from Table 1). Thus, the exact calculation is as follows: −0.0012 * (1.54/0.155) = −0.012. For daily smoking, we follow a similar procedure and the exact calculation is as follows: −0.0062 * (1.54/0.112) = −0.085.

  18. 18.

    Given that the vast majority of our e-cigarette tax variation primarily comes from tax introductions rather than tax increases, we are unable to calculate an e-cigarette tax elasticity because the percent change in the tax is undefined.


  1. 116th Congress of the United States. (2020). Protecting American lungs and reversing the youth tobacco epidemic act of 2020. Washington, DC.

  2. Abouk, R., & Adams, S. (2017). Bans on electronic cigarette sales to minors and smoking among high school students. Journal of Health Economics, 54, 17–24.

    Google Scholar 

  3. Abouk, R., Adams, S., Feng, B., Maclean, J. C., & Pesko, M. F. (2019). The effect of e-cigarette taxes on pre-pregnancy and prenatal smoking, and birth outcomes. National Bureau of Economic Research.

  4. Ali, M. M., Dowd, W. N., Classen, T., Mutter, R., & Novak, S. P. (2017). Prescription drug monitoring programs, nonmedical use of prescription drugs, and heroin use: evidence from the national survey of drug use and health. Addictive Behaviors, 69, 65–77.

    Google Scholar 

  5. Allcott, H., & Rafkin, C. (2020). Optimal regulation of e-cigarettes: Theory and evidence. National Bureau of Economic Resarch Working Paper Series.

  6. Altonji, J. G., Kahn, L. B., & Speer, J. D. (2016). Cashier or consultant? Entry labor market conditions, field of study, and career success. Journal of Labor Economics, 34(S1), S361–S401.

    Google Scholar 

  7. Anderson, M. D., Hansen, B., & Rees, D. I. (2015). Medical marijuana laws and teen marijuana use. American Law and Economics Review, 17(2), 495–528.

    Google Scholar 

  8. Autor, D. H. (2003). Outsourcing at will: The contribution of unjust dismissal doctrine to the growth of employment outsourcing. Journal of Labor Economics, 21(1), 1–42.

    Google Scholar 

  9. Barbaresco, S., Courtemanche, C. J., & Qi, Y. (2015). Impacts of the affordable care act dependent coverage provision on health-related outcomes of young adults. Journal of Health Economics, 40, 54–68.

    Google Scholar 

  10. Bertrand, M., Duflo, E., & Mullainathan, S. (2004). How much should we trust differences-in-differences estimates? Quarterly Journal of Economics, 119(1), 249–275.

    Google Scholar 

  11. Besley, T., & Case, A. (2000). Unnatural experiments? Estimating the incidence of endogenous policies. The Economic Journal, 110(467), 672–694.

    Google Scholar 

  12. Bishop, J. M. (2018). Does cigarette smuggling prop up smoking rates? American Journal of Health Economics, 4(1), 80–104.

    Google Scholar 

  13. Callison, K., & Kaestner, R. (2014). Do higher tobacco taxes reduce adult smoking? New evidence of the effect of recent cigarette tax increases on adult smoking. Economic Inquiry, 52(1), 155–172.

    Google Scholar 

  14. Cantrell, J., Huang, J., Greenberg, M. S., Xiao, H., Hair, E. C., & Vallone, D. (2019). Impact of e-cigarette and cigarette prices on youth and young adult e-cigarette and cigarette behaviour: Evidence from a national longitudinal cohort. Tobacco Control, 29(4), 374–380.

    Google Scholar 

  15. Carpenter, C., & Cook, P. J. (2008). Cigarette taxes and youth smoking: New evidence from national, state, and local youth risk behavior surveys. Journal of Health Economics, 27(2), 287–299.

    Google Scholar 

  16. Centers for Disease Control and Prevention. (2019). CDC State System.

  17. Centers for Disease Control and Prevention. (2020). Outbreak of lung injury associated with e-cigarette use, or vaping. Atlanta: Centers for Disease Control and Prevention.

    Google Scholar 

  18. Chaloupka, F. J., & Warner, K. E. (2000). The economics of smoking. In A. J. Culyer & J. P. Newhouse (Eds.), Handbook of Health Economics, 1539–1627.

  19. Community Preventive Services Task Force. (2014). Reducing tobacco use and secondhand smoke exposure: Interventions to increase the unit price for tobacco products.

  20. Cooper, M. T., & Pesko, M. F. (2017). The effect of e-cigarette indoor vaping restrictions on adult prenatal smoking and birth outcomes. Journal of Health Economics, 56, 178–190.

    Google Scholar 

  21. Cotti, C., Nesson, E., & Tefft, N. (2016). The effects of tobacco control policies on tobacco products, tar, and nicotine purchases among adults: Evidence from household panel data. American Economic Journal: Economic Policy, 8(4), 103–123.

    Google Scholar 

  22. Cotti, C., Nesson, E., & Tefft, N. (2018). The relationship between cigarettes and electronic cigarettes: Evidence from household panel data. Journal of Health Economics, 61, 205–219.

    Google Scholar 

  23. Cotti, C. D., Courtemanche, C., Maclean, J. C., Nesson, E., Pesko, M., & Tefft, N. (2020). The effects of e-cigarette taxes on e-cigarette prices and tobacco product sales: Evidence from retail panel data. NBER Working Paper.

  24. Courtemanche, C., & Feng, B. (2018). Can cigarette taxes still reduce youth smoking? Working paper.

  25. Creamer, M. R., Wang, T. W., Babb, S., Cullen, K. A., Day, H., Willis, G., Jamal, A., & Neff, L. (2019). Tobacco product use and cessation indicators among adults—United States, 2018. Morbidity and Mortality Weekly Report, 68(45), 1013–1019.

    Google Scholar 

  26. Dai, H., & Leventhal, A. M. (2019). Prevalence of e-cigarette use among adults in the United States, 2014–2018. JAMA, 322(18), 1824–1827.

    Google Scholar 

  27. Dave, D., Feng, B., & Pesko, M. F. (2019). The effects of e-cigarette minimum legal sale age laws on youth substance use. Health Economics, 28(3), 419–436.

    Google Scholar 

  28. Dave, D., Dench, D., Kenkel, D., Mathios, A., & Wang, H. (2020). News that takes your breath away: Risk perceptions during an outbreak of vaping-related lung injuries. Journal of Risk & Uncertainty, 60(3).

  29. DeCicca, P., & McLeod, L. (2008). Cigarette taxes and older adult smoking: Evidence from recent large tax increases. Journal of Health Economics, 27(4), 918–929.

    Google Scholar 

  30. DeCicca, P., Kenkel, D., & Mathios, A. (2002). Putting out the fires: Will higher taxes reduce the onset of youth smoking? Journal of Political Economy, 110(1), 144–169.

    Google Scholar 

  31. Du, Y., Liu, B., Xu, G., Rong, S., Sun, Y., Wu, Y., Snetselaar, L. G., Wallace, R. B., & Bao, W. (2020). Association of electronic cigarette regulations with electronic cigarette use among adults in the United States. JAMA Network Open, 3(1), e1920255–e1920255.

    Google Scholar 

  32. Farber, H. S., Herbst, D., Kuziemko, I., & Naidu, S. (2018). Unions and inequality over the twentieth century: New evidence from survey data. National Bureau of Economic Research.

  33. Friedman, A. S. (2015). How does electronic cigarette access affect adolescent smoking? Journal of Health Economics., 44, 300–308.

    Article  Google Scholar 

  34. Ghimire, K. M., & Maclean, J. C. (2020). Medical marijuana and workers’ compensation claiming. Health Economics, 29(4), 419–434.

    Google Scholar 

  35. Glasser, A. M., Collins, L., Pearson, J. L., Abudayyeh, H., Niaura, R. S., Abrams, D. B., & Villanti, A. C. (2017). Overview of electronic nicotine delivery systems: A systematic review. American Journal of Preventive Medicine, 52(2), e33–e66.

    Google Scholar 

  36. Gruber, J., & Frakes, M. (2006). Does falling smoking lead to rising obesity? Journal of Health Economics, 25(2), 183–197.

    Google Scholar 

  37. Gruber, J., & Köszegi, B. (2001). Is addiction “rational”? Theory and evidence. The Quarterly Journal of Economics, 116(4), 1261–1303.

    Google Scholar 

  38. Hajek, P., Phillips-Waller, A., Przulj, D., Pesola, F., Myers Smith, K., Bisal, N., Li, J., Parrott, S., Sasieni, P., & Dawkins, L. (2019). A randomized trial of e-cigarettes versus nicotine-replacement therapy. New England Journal of Medicine, 380(7), 629–637.

    Google Scholar 

  39. Hansen, B., Sabia, J. J., & Rees, D. I. (2017). Have cigarette taxes lost their bite? New estimates of the relationship between cigarette taxes and youth smoking. American Journal of Health Economics, 3(1), 60–75.

    Google Scholar 

  40. Horn, B. P., Maclean, J. C., & Strain, M. R. (2017). Do minimum wage increases influence worker health? Economic Inquiry, 55(4), 1986–2007.

    Google Scholar 

  41. Huang, J., Gwarnicki, C., Xu, X., Caraballo, R. S., Wada, R., & Chaloupka, F. J. (2018). A comprehensive examination of own- and cross-price elasticities of tobacco and nicotine replacement products in the US. Preventive Medicine, 117, 107–114.

    Google Scholar 

  42. Jun, J., & Kim, J. K. (2020). Do state regulations on e-cigarettes have impacts on the e-cigarette prevalence? Tobacco Control: tobaccocontrol-2019-055287.

  43. Kaiser Family Foundation. (2020). Status of state action on the Medicaid expansion decision. Washington, DC.

  44. Lovenheim, M. F. (2009). The effect of teachers’ unions on education production: Evidence from union election certifications in three midwestern states. Journal of Labor Economics, 27(4), 525–587.

    Google Scholar 

  45. Maclean, J. C., Kessler, A. S., & Kenkel, D. S. (2016). Cigarette taxes and older adult smoking: Evidence from the health and retirement study. Health Economics, 25(4), 424–438.

    Google Scholar 

  46. Maclean, J. C., Pesko, M. F., & Hill, S. C. (2019a). Public insurance expansions and smoking cessation medications. Economic Inquiry, 57(4), 1798–1820.

    Google Scholar 

  47. Maclean, J. C., Tello-Trillo, D. S., & Webber, D. (2019b). Losing insurance and behavioral health inpatient care: Evidence from a large-scale medicaid disenrollment. National Bureau of Economic Research.

  48. Marti, J., Buckell, J., Maclean, J. C., & Sindelar, J. (2019). To “vape” or smoke? Experimental evidence on adult smokers. Economic Inquiry, 57(1), 705–725.

    Google Scholar 

  49. McGeary, K. A., Dave, D., Lipton, B., & Roeper, T. (2020). Impact of comprehensive smoking bans on the health of infants and children. American Journal of Health Economics, 6(1), 1–38.

    Google Scholar 

  50. Miller, S. (2012). The effect of insurance on emergency room visits: An analysis of the 2006 Massachusetts health reform. Journal of Public Economics, 96(11–12), 893–908.

    Google Scholar 

  51. Miller, S., & Wherry, L. R. (2017). Health and access to care during the first 2 years of the ACA Medicaid expansions. New England Journal of Medicine, 376(10), 947–956.

    Google Scholar 

  52. National Institute on Alcohol Abuse and Alcoholism. (2019). Alcohol Policy Information System (Apis): Beer Taxes.

  53. Nesson, E. (2017). Heterogeneity in smokers’ responses to tobacco control policies. Health Economics, 26(2), 206–225.

    Google Scholar 

  54. Orzechowski, W., & Walker, R. (2018). The tax burden on tobacco 2017: Historical compilation. Arlington.

  55. Pacula, R. L., Chriqui, J. F., & King, J. (2003). Marijuana decriminalization: What does it mean in the United States? National Bureau of Economic Research Working Paper Series.

  56. Pesko, M. F. (2014). Stress and smoking: Associations with terrorism and causal impact. Contemporary Economic Policy, 32(2), 351–371.

    Google Scholar 

  57. Pesko, M. F., & Currie, J. M. (2019). E-cigarette minimum legal sale age laws and traditional cigarette use among rural pregnant teenagers. Journal of Health Economics, 66, 71–90.

    Google Scholar 

  58. Pesko, M. F., & Warman, C. (2017). The effect of prices on youth cigarette and e-cigarette use: Economic substitutes or complements? Social Science Research Network.

  59. Pesko, M. F., Hughes, J. M., & Faisal, F. S. (2016a). The influence of electronic cigarette age purchasing restrictions on adolescent tobacco and marijuana use. Preventive Medicine, 87, 207–212.

    Google Scholar 

  60. Pesko, M. F., Kenkel, D. S., Wang, H., & Hughes, J. M. (2016b). The effect of potential electronic nicotine delivery system regulations on nicotine product selection. Addiction, 111(4), 734–744.

    Google Scholar 

  61. Pesko, M. F., Huang, J., Johnston, L. D., & Chaloupka, F. J. (2018). E-cigarette price sensitivity among middle-and high-school students: Evidence from monitoring the future. Addiction, 113(5), 896–906.

    Google Scholar 

  62. Public Health Law Center. (2019). E-cigarette tax: States with laws taxing e-cigarettes. Public Health Law Center.

  63. Public Health Law Center. (2020). E-cigarette regulations—Washington, DC. Saint Paul, MN: Public Health Law Center at the Mitchell Hamline School of Law.

  64. Royal College of Physicians. (2019). Nicotine without smoke: Tobacco harm reduction. London, England: Royal College of Physicians.

  65. Sabia, J. J., & Nguyen, T. T. (2018). The effect of medical marijuana laws on labor market outcomes. The Journal of Law and Economics, 61(3), 361–396.

    Google Scholar 

  66. Saffer, H., Dench, D., Dave, D., & Grossman, M. (2018). E-cigarettes and adult smoking. National Bureau of Economic Research Working Paper.

  67. Saffer, H., Dench, D. L., Grossman, M., & Dave, D. M. (2020). E-cigarettes and adult smoking: Evidence from Minnesota. Journal of Risk & Uncertainty, 60(3).

  68. Schmidheiny, K., & Siegloch, S. (2019). On event study designs and distributed-lag models: Equivalence, generalization and practical implications. IZA discussion paper 12079.

  69. Stoklosa, M., Drope, J., & Chaloupka, F. J. (2016). Prices and e-cigarette demand: Evidence from the European Union. Nicotine & Tobacco Research, 18(10), 1973–1980.

    Google Scholar 

  70. U.S. Department of Health and Human Services. (2016). E-cigarette use among youth and young adults: A report of the surgeon general. Rockville, MD: U.S. Department of Health and Human Services.

    Google Scholar 

  71. United States Census Bureau. (2020). Quickfacts: United States. Washington, DC.

  72. United States General Accounting Office. (2004). Federal law enforcement efforts and seizures increasing. Washington, DC: United States General Accounting Office.

    Google Scholar 

  73. University of Kentucky Center for Poverty Research. (2019). UKCPR National Welfare Data, 1980–2017. Lexington, KY: Gatto College of Business and Economics, University of Kentucky.

    Google Scholar 

  74. Vapor Products Tax. (2019). Tax data center.

  75. Viscusi, K. (2020). Electronic cigarette risk beliefs and usage after the vaping illness outbreak. Journal of Risk & Uncertainty, 60(3).

  76. Wang, T. W., Asman, K., Gentzke, A. S., Cullen, K. A., Holder-Hayes, E., Reyes-Guzman, C., Jamal, A., Neff, L., & King, B. A. (2018). Tobacco product use among adults—United States, 2017. Morbidity and Mortality Weekly Report, 67(44), 1225–1232.

    Google Scholar 

  77. Webber, D. A. (2016). Are college costs worth it? How ability, major, and debt affect the returns to schooling. Economics of Education Review, 53, 296–310.

    Google Scholar 

  78. Zheng, Y., Zhen, C., Dench, D., & Nonnemaker, J. M. (2017). U.S. demand for tobacco products in a system framework. Health Economics, 26(8), 1067–1086.

    Google Scholar 

Download references


We thank Michael Grossman, Henry Saffer, Keisha Solomon, and session participants at the Association for Public Policy and Management Fall Research Conference for helpful comments. We thank Amy Fontinelle for proofreading the manuscript.

Author information



Corresponding author

Correspondence to Michael F. Pesko.

Ethics declarations


Research reported in this publication was supported by the National Institute on Drug Abuse of the National Institutes of Health under Award Number R01DA045016 (PI: Michael F. Pesko). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Institutes of Health.

The research in this paper was conducted while the authors were Special Sworn Status researchers of the U.S. Census Bureau at the Atlanta Research Data Center. Research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the U.S. Census Bureau or the National Center for Health Statistics. The results have been reviewed to ensure that no confidential data are revealed.

Researcher(s) own analyses calculated (or derived) based in part on data from The Nielsen Company (U.S.), LLC and marketing databases provided through the Nielsen Datasets at the Kilts Center for Marketing Data Center at The University of Chicago Booth School of Business. The conclusions drawn from the Nielsen data are those of the researcher(s) and do not reflect the views of Nielsen. Nielsen is not responsible for, had no role in, and was not involved in analyzing and preparing the results reported herein.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Electronic supplementary material


(PDF 295 kb)

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Pesko, M.F., Courtemanche, C.J. & Maclean, J.C. The effects of traditional cigarette and e-cigarette tax rates on adult tobacco product use. J Risk Uncertain 60, 229–258 (2020).

Download citation


  • Smoking
  • E-cigarettes
  • Taxation
  • Elasticity

JEL Classifications

  • H2
  • I12
  • I18