Ohio economists split on benefits of raising the cigarette tax

Cigarette brands manufactured by Reynolds Amercian are displayed at a tobacco shop. (Photo by Justin Sullivan/Getty Images)

Ohio has the fourth-highest rate of cigarette smoking in the United States, bringing with it all the expenses associated with the sickness and disability caused by smoking. But how to most effectively bring that rate down is a matter of some debate, according to a survey of a panel of Ohio economists that was released last week.

About one-fifth ( 20.8% ) of residents of the Buckeye State still smoked as of 2019, according to the U.S. Centers for Disease Control and Prevention. That’s much higher than the 11.5% national average the agency reported for 2021.

Across the country, rates of smoking have fallen steeply as states have imposed steeper taxes on them — from 20.9% in 2005 to 11.5% in 2021. In Ohio, policy makers are searching for ways to keep up.

Cities have been trying to restrict sales of flavored tobacco, which can be appealing to kids. But the Republican-dominated legislature last year passed a law taking away local governments’ power to impose such restrictions. When Gov. Mike DeWine, who is also a Republican, vetoed the bill, the legislature overrode him .

So what about the time-tested strategy of simply raising cigarette taxes some more?

The firm Scioto Analysis put that question to a panel of 23 economists, asking if raising the per-pack tax from $1.60 to $2 would raise consumer costs, and asking whether it would decrease consumption.

Perhaps not surprisingly, most thought that increased taxes would lead to increased prices, with 15 agreeing, six disagreeing and two uncertain.

“Yes, most of the tax will be passed on to the consumers,” Kevin Egan of the University of Toledo wrote in the comment section of the survey. “That is the point of this corrective tax, to increase the price so that citizens choose to smoke less.”

The group was more divided on whether such a tax increase would reduce consumption. Eight economists agreed, 10 disagreed, and five were uncertain.

Some who disagreed said the highly addictive nature of nicotine is going to drive people to buy cigarettes no matter what the price.

“Studies have shown that higher cigarette prices reduce the likelihood that youth will begin smoking and reduce cigarette consumption among youth. The result for adults is generally not as strong,” Kathryn Wilson of Kent State University wrote. “I agree that the tax would likely result in a reduction in cigarette consumption, particularly among youth, but I don’t know that the tax increase would be enough to significantly reduce consumption overall.”

A study published in 2018 by researchers at the University of Pittsburgh Medical Center looked at increased cigarette taxes and rates of smoking from 2001 to 2015. It found that for every quarter taxes were increased, 0.6% fewer people smoked .

And as Wilson and some of the other economists in the Scioto survey said, the effects were particularly pronounced among young people. With a 25-cent tax increase, 1.5% fewer people aged 18 to 24 smoked — a reduction more than three times as big as the next closest age group, those aged 25-44.

Depressingly, the study also found that those least able to pay increased taxes belong to the group least likely to quit smoking because of them.

“Paradoxically, when stratifying by income, cigarette taxes had the least impact in smoking prevalence for those with the lowest income, with a $0.25 tax increase associated with a minimal change (0.09% reduction) in smoking prevalence among participants with income <$25,000,” the study said. “In contrast, there was an estimated 0.75% reduction per $0.25 tax increase in those making $25,000-$50,000; a 0.63% reduction per $0.25 tax increase in those making $50,000-$75,000; and a 0.62% reduction per $0.25 tax increase in those making ≥$75,000.”

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