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The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data

Hanson, Andrew and Sullivan, Ryan

Abstract:

This paper uses a recent increase in Wisconsin’s tobacco tax as a natural experiment to measure the economic incidence of tobacco taxation, using micro-level data on cigarette prices from retail locations in Wisconsin and states that share its border. We find that Wisconsin’s $1 tobacco tax increase was over-shifted to consumers; they pay the entire amount of the tax as well as a premium of between 8–17 cents per pack of cigarettes. We also use geo-coded data to test if the incidence of the tobacco tax is different for locations near the border of states with different tobacco taxation.

Citation

Hanson, Andrew and Sullivan, Ryan (2009), The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data, National Tax Journal, 62:4, pp. 677-98

DOI: dx.doi.org/10.17310/ntj.2009.4.05