The Effectiveness of Cigarette Taxes on Older Adult Smokers: Evidence from Recent State Tax Increases

Using the recent excise tax increases at the state-level in the United States from 2000 to 2010, I estimate two-way fixed effects models of older adult smoking participation. I find that a one dollar increase in the excise tax reduces smoking participation by 2.5 percent for adults age 30 to 74. An investigation of the age distribution finds that results are sensitive to how older adult age groups are defined. The effect of one dollar excise tax increase is largest for a 45 to 49 year old group, reducing smoking participation by over 7 percent. The effect of taxation is more widespread across ages for women and low income smokers, while women and high income smokers reduce their smoking participation earlier in life. I find evidence that the effect of taxation on smoking participation of established smokers diminishes at higher tax and price levels. There is a clear need for complementary cessation strategies for smokers unresponsive to cigarette excise tax increases and this need is growing over time. JEL Codes: I18, I12