Playing with Fire: Cigarettes, Taxes, and Competition from the Internet
Austan Goolsbee (),
Michael Lovenheim () and
Joel Slemrod ()
American Economic Journal: Economic Policy, 2010, vol. 2, issue 1, 131-54
This paper documents the rise of the Internet as a source of state tax-free cigarettes and its impact on taxed sales elasticities. Using data on cigarette tax rates, taxable cigarette sales and individual smoking rates by state from 1980 to 2005 merged with data on Internet penetration, this paper documents that there has been a substantial increase in the sensitivity of taxable cigarette sales to state tax rates that is correlated with the rise of Internet usage within states. The estimates imply that the increased sensitivity from cigarette smuggling over the Internet has lessened the revenue generating potential of cigarette tax increases significantly, although states are still far from the revenue-maximizing tax rates. (JEL D12, H25, H31, H71, L66)
JEL-codes: D12 H25 H31 H71 L66 (search for similar items in EconPapers)
Note: DOI: 10.1257/pol.2.1.131
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Working Paper: Playing With Fire: Cigarettes, Taxes and Competition From the Internet (2009)
Working Paper: Playing with Fire: Cigarettes, Taxes and Competition from the Internet (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:aea:aejpol:v:2:y:2010:i:1:p:131-54
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