The Political Economy of Cigarette Taxation

30 Pages Posted: 18 Jan 2013

See all articles by Adam J. Hoffer

Adam J. Hoffer

University of Wisconsin - La Crosse

Date Written: January 17, 2013

Abstract

To date, the literature on cigarette excise taxation has focused on demand, its elasticity, and state revenue from the taxes. By examining the factors that influence cigarette excise tax rates across U.S. states, this paper helps to fill the under-researched aspect of cigarette taxation. Empirical evidence presented here supports the special interest hypothesis when analyzing between-state tax rate differentials. Using a spatial econometric framework, this paper illustrates that the effect of special interest groups is six times greater once spillover effects are taken into consideration. Finally, time splits of the data are also presented to reveal stark changes in the determinants of state-levied cigarette taxes over time.

Keywords: cigarette taxation, special interest groups, spatial methods, spillover effects

JEL Classification: C23, H71, H73

Suggested Citation

Hoffer, Adam J., The Political Economy of Cigarette Taxation (January 17, 2013). Available at SSRN: https://ssrn.com/abstract=2202442 or http://dx.doi.org/10.2139/ssrn.2202442

Adam J. Hoffer (Contact Author)

University of Wisconsin - La Crosse ( email )

1725 State Street
La Crosse, WI 54601
United States

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