Cigarette Purchasing Behaviors and Financial Burden of Cigarette Spending after a Major Tobacco Tax Increase in California: Evidence from Household Panel Data

Objectives. To Examine The Long-Term Pattern Of Cigarette Purchasing Behaviors And Financial Burden Of Cigarette Spending Among California Households Following The Implementation Of California Proposition 56 (Prop 56), Which Increased The Cigarette Excise Tax By $2-Per-Pack On April 1, 2017.

Methods. Using Longitudinal Nielseniq Consumer Panel Data, Our Study Sample Comprised A Cohort Of California Households Who Participated In The Panel In 2016 (N=5,318) And The Subsequent Years Until 2022 (N= 2,324). The Outcomes Include Cigarette Purchasing Behaviors And Financial Burden Of Cigarette Spending. We Compared Outcomes For 2016 And 2018-2022 (Post-Implementation) For All Households And Across Income Groups.

Results. In 2016, 11.4% Of California Households Purchased Cigarettes. Following Prop 56 Implementation, This Declined To 6.7% (P<.0001) During 2018-2022, With The Smallest Reduction Occurring In The Low-Income Group (2.0%) Compared To Middle-Income (P=.0157) And High-Income Households (P=.0091). Overall, Cigarette Spending Significantly Increased By $124 (P=.0053), Driven Largely By A $352 Rise In The Low-Income Group (P<.0001). The Low-Income Group Also Experienced The Largest Increase (1.3%) In Financial Burden, Measured As The Proportion Of Income Spent On Cigarettes, Though This Was Not Statistically Significant.

Conclusions. Our Findings Indicate That Prop 56 Reduced The Overall Percentage Of Households Purchasing Cigarettes; However, The Low-Income Group Benefited The Least. The Policy Increased Overall Cigarette Spending, Particularly Among The Low-Income Group, Appearing To Raise Their Financial Burden. Earmarking Tobacco Excise Taxes For Targeted Cessation Programs To Help Low-Income Smokers Quit Are Needed To Mitigate The Regressivity Of Cigarette Excise Taxes.

Keywords: tax increase policy, cigarette purchase, cigarette spending, financial burden, tobacco disparity

Suggested Citation: Suggested Citation

Gu, Dian and Sung, Hai-Yen and Yao, Tingting and Wang, Yingning and Keeler, Courtney and Max, Wendy, Cigarette Purchasing Behaviors and Financial Burden of Cigarette Spending after a Major Tobacco Tax Increase in California: Evidence from Household Panel Data (March 19, 2025). Kilts Center at Chicago Booth Marketing Data Center Paper, Available at SSRN: https://ssrn.com/abstract=5223689 or http://dx.doi.org/10.2139/ssrn.5223689