161941 Cross-border tobacco prices and cigarette excise taxes

Tuesday, November 6, 2007

Richard W. Wilson, DHSc, MPH , Health Promotion and Behavioral Sciences, University of Louisville School of Public Health and Information Sciences, Louisville, KY
Debra Miller , Kentucky Youth Advocates, Jeffersontown, KY
Patrick Andrade , Kentucky Youth Advocates, Jeffersontown, KY
There is consensus that increasing cigarette excise tax (and price) is an important way to discourage smoking. While there have been significant increases in excise taxes, there is great variation between states. When advocates seek to increase state excise taxes, opposition comes from retailers claiming that it will hurt business. Kentucky has historically had a very low cigarette tax and has “enjoyed” substantial sales from people coming from states with higher taxes. This project analyzes cigarette excise taxes and retail prices in states bordering Kentucky in comparison to in-state tax and price. A uniform set of cigarette brands were selected and then price comparisons were done in communities across Kentucky's border in surrounding states. Data were collected in 2005; price sampling was done in 21 pairs of communities on opposite sides of the border, in 117 retail stores. Findings were that tax disparities were not proportional to price disparities. For example, while the tax in Kentucky was $0.03 per pack compared to $0.20 in Tennessee, the retail price in Tennessee was only $0.03 higher. Other findings will be discussed. The conclusion is that retailers, distributors, and manufacturers establish prices in response to many factors, not just excise taxes. They can blunt the impact of tax changes to prop up sales. This is bad news to advocates: increasing the tax may have less impact than anticipated, but also good news: claims of opposition forces regarding business closings and employment losses may be refuted, based on these findings.

Learning Objectives:
1. explain the issue of cross-border price differences and its impact on tobacco control policy 2. outline a methodology for analyzing the interaction of cross-border cigarette prices and disparities in cigarette excise taxes 3. review the findings of an analysis of cross-border prices versus taxes and the implications for tobacco control.

Keywords: Tobacco Control, Advocacy

Presenting author's disclosure statement:

Any relevant financial relationships? No
Any institutionally-contracted trials related to this submission?

I agree to comply with the American Public Health Association Conflict of Interest and Commercial Support Guidelines, and to disclose to the participants any off-label or experimental uses of a commercial product or service discussed in my presentation.