In 2014, the Surgeon General set a $10 per pack target price for cigarettes in order to effectively decrease tobacco use. However, today, cigarettes in the United States cost an average of $6 a pack.
Raising cigarette prices through excise tax is one of the gold standards for reducing tobacco use. However, other non-tax price policies can have a significant impact as well.
In a recent study, “Estimating the Impact of Raising Prices and Eliminating Discounts on Cigarette Smoking Prevalence in the United States,” published inPublic Health Reports, researchers estimated changes in smoking prevalence based on simulations of three different price scenarios and found:
- A $0.94 per-pack cigarette price increase (via a federal tax, as has been proposed in the fiscal year 2017 President’s budget) could result in 0.5 % fewer smokers ages 12-17 (teen smokers), 2.5% fewer smokers ages 18–25 years (young adult smokers), and 0.8% fewer smokers ages 26 and older.
- A $10 per-pack retail price, allowing discounts, could result in 2.4% fewer teen smokers, 11.6% fewer young adult smokers, and 3.6% smokers aged 26 years and older.
- A $10 per-pack average retail price, eliminating discounts had the most impact and could result in 2.5% fewer teen cigarette smokers; 12.2% fewer young adult smokers, and 3.8% fewer smokers ages 26 and older, which amounts to a total of 12.5 million fewer smokers overall, and 1.5 million fewer early deaths of US youth and young adults.
States that currently have the lowest excise taxes and highest smoking prevalence would experience the greatest decreases in smoking rates. However, the simulation model used does not account for non-cigarette tobacco products. Learn more about non-tax price policies.
In addition, as highlighted in Tobacconomics, two other recent studies published in the National Bureau of Economic Research, show the effectiveness of raising cigarette prices for reducing consumption. Researchers found that price sensitivity increases as actual prices increase. On average, increasing cigarette prices by 10% results in 3.6% reduction in cigarette consumption for adults under the age of 45 years old; however, the subsequent per-pack price matters as well. The researchers found that when cigarettes cost $3 per pack, demand decreased by 2.2%. However, when cigarettes cost $9 per pack, demand decreased by 6.7%. The higher the price, the greater the reduction in demand and in cigarette consumption. As local cigarette prices vary vastly due to differences in taxation and pricing policies at the local level, and individuals can travel to different localities to evade rising cigarette taxes, the authors also propose that “policy efforts aimed at tax harmonization may be more effective than non-coordinated tax increases that contribute to greater local price variation”. Read more.