Taxing Consumption and the Take-Up of Public Assistance: The Case of Cigarette Taxes and Food Stamps

40 Pages Posted: 22 Jul 2017  

Kyle Rozema

University of Chicago - Law School

Nicolas R. Ziebarth

Cornell University

Date Written: June 9, 2017

Abstract

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

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

Kyle Rozema (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

HOME PAGE: http://www.kylerozema.com

Nicolas R. Ziebarth

Cornell University ( email )

Ithaca, NY
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=nrz2

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