A major state tobacco tax increase, the master settlement agreement, and cigarette consumption: The California experience

H.-Y. Sung, T.-W. Hu, M. Ong, T.E. Keeler and M.-L. Sheu

American Journal of Public Health, 2005, vol. 95, issue 6, 1030-1035

Abstract: Objectives. We evaluated the combined effects on California cigarette consumption of an additional 500 per pack state tax imposed by Proposition 10 of January 1999 and a 450 per pack increase in cigarette prices stemming from the Master Settlement Agreement (MSA) of November 1998. Methods. We used quarterly cigarette sales data for the period 1984-2002 to estimate a time-series intervention model adjusting for seasonal variations and time trend. Results. Over the period 1999 through 2002, the combined effect was to reduce cigarette consumption by 2.4 packs per capita per quarter (1.3 billion packs total over the 4-year period) and to raise state tax revenues by $2.1 billion. These effects were similar to the effects of a 25 per pack tax increase enacted by Proposition 99 a decade earlier, although with decreased relative effectiveness as measured by percentage of reduction in cigarette consumption divided by percentage of increase in taxation (-0.44 vs -0.60). Conclusions. A major increase in price through taxation and the MSA provided a strong economic disincentive for smokers in a state with a low smoking prevalence. This effect could be reinforced if part of the MSA payments were devoted to tobacco control programs.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:aph:ajpbhl:10.2105/ajph.2004.042697_5

DOI: 10.2105/AJPH.2004.042697

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