40 Pages Posted: 22 Jul 2017
Date Written: June 9, 2017
We exploit cigarette tax variation across US states from 2001 to 2012 to show how taxing inelastic consumption goods can induce low-income households to enroll in public assistance programs. Using a novel household panel of monthly food stamp enrollment from the Current Population Survey, we enrich standard cigarette tax difference-in-differences models with an additional control group: non-smoking households. Smoking households are “treated” with higher taxes while non-smoking households are not. Marginal smoking households respond to increases in cigarette taxes by taking-up food stamps at rates higher than smoking households in other states and non-smoking households in the same state.
Keywords: Consumption Taxes, Cigarette Taxes, Public Assistance Programs, Food Stamps, Program Participation
JEL Classification: L66, H21, H23, H26, H71, I18
Suggested Citation: Suggested Citation
Rozema, Kyle and Ziebarth, Nicolas R., Taxing Consumption and the Take-Up of Public Assistance: The Case of Cigarette Taxes and Food Stamps (June 9, 2017). Available at SSRN: https://ssrn.com/abstract=3004710