The Political Economy of Cigarette Taxation
30 Pages Posted: 18 Jan 2013
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: Suggested Citation