COMMENT: Tobacco taxes sound good, however they hurt the poor and improve smuggling | Visitor Columns

Our lawmakers are on a mission to end what they have termed the public health crisis – tobacco use.

Up until that point, Governor Tim Walz was proposing tax increases on cigarettes and vaping products. Similar bills were introduced during this term to increase taxes on tobacco products and ban flavored tobacco, including e-cigarettes and other vape products. But are these proposals the silver bullet for tobacco use that the legislature proclaims them to be? A new report from the Center of the American Experiment shows otherwise.

Smoking and tobacco use are generally in decline in Minnesota. Between 2000 and 2020, cigarette consumption among high school students decreased by 90.1% and among middle school students by 78%. Even after taking e-cigarettes into account, the reported consumption of tobacco products among adolescents decreased significantly in 2020 – 20.5% among high school students and 4.1% among middle school students – compared to the rates of 38.7% and 12.6% in 2000. This is a national and even adult trend that correlates very little with cigarette tax increases.

The truth is that tax increases have very little effect on tobacco use, as regular and long-term use is much more common among disadvantaged groups who are less responsive to high prices and therefore less likely to quit. For example, people with mental health problems in Minnesota have twice the national average smoking rate.

However, high taxes encourage smuggling as tax differentials offer opportunities for profit. In 2018, Minnesota had the fifth highest per-pack cigarette tax rate in the country and fifth place for cigarette smuggling – 36% of cigarettes smoked in Minnesota were smuggled from other states.

Currently, the total tax rate on cigarettes in Minnesota – $ 3.673 – is about eight times higher than North Dakota’s – 44 cents. It would be irrational for our policymakers to believe that a tax hike wouldn’t make Minnesota buy their cigarettes in North Dakota or any of our other three neighbors who happen to have lower consumption taxes. It did so after Minnesota raised the cigarette excise tax in 2013. Frontier communities saw a significant drop in cigarette sales as well as a drop in sales of non-tobacco products that accompany tobacco products. Additionally, Minnesota has some of the highest taxes on vaping products, any further increase would warrant a similar result.

More importantly, tobacco taxes hurt the poor the most, as they spend a higher proportion of their income on tobacco products and have higher tobacco consumption. In 2018, Minnesotans with household incomes of $ 35,000 or less had a smoking rate of 24.1% compared to 8.7% for those with household incomes above $ 75,000. And, according to the Tax Incidence Tax Study 2021, in 2018 the 10% of Minnesotans with the lowest incomes paid an effective tax rate of 2.77% on tobacco products, compared to 0.05% paid by the 10% with the highest incomes . Policymakers risk adding further burdens to those on low incomes by increasing tobacco taxes.

If the goal is indeed to protect public health, lawmakers need to rethink policies that only harm businesses but have no discernible impact on tobacco use, while taxing smokers – the bulk of its revenue – in general Fund and not flows into smoking prevention and quitting programs. Research has found that e-cigarettes and other vapor products are up to 95% less harmful than cigarettes, and they help smokers quit smoking. Improved access to these products could be a great way to reduce smoke-related illnesses and deaths. In general, regular e-cigarette use among adolescents is rare, but coincides strongly with reduced cigarette smoking. Policies that restrict access to these products – such as the proposed ones – are counterproductive and harm public health by pushing more people, especially teenagers, to smoke.

– Martha Njolomole is an economist at the Center of the American Experiment.