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Taxation on cigarettes and vapes often differs based on health policy goals, perceived risks, and regulatory frameworks. Cigarette taxes are usually higher, reflecting their long-known health risks, such as cancer and heart disease. These taxes aim to reduce smoking rates and cover public health costs. Vapes, which are newer and perceived by some as a less harmful alternative, tend to face lower or more varied taxes.

However, there can be unintended consequences of this tax discrepancy. One is the potential for encouraging youth to switch from cigarettes to vapes, which may still pose health risks, particularly with nicotine addiction. Another consequence is the rise of unregulated or black-market vape products, which could be more harmful than taxed, regulated products. Additionally, if vape taxes increase, there’s a risk that adult smokers trying to quit may be disincentivized to switch to vaping, potentially leading to continued cigarette use. Balancing public health objectives with the tax structure is a challenge for policymakers.

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How do differences in cigarette and vape taxes affect consumer behavior and market demand for each product?

What are the potential market distortions or unintended consequences of having different tax rates for cigarettes and vapes?

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To vape or not to vape: When an e-cigarette tax has an impact

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To vape or not to vape: When an e-cigarette tax has an impact

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Credit: Pixabay/CC0 Public Domain

E-cigarettes have become a big concern for public health, especially when it comes to young people using these harmful products. The U.S. government has considered a tax on vaping products to discourage people, especially underage users, from vaping. A new study from the Cornell SC Johnson College of Business aims to determine how much of an impact a tax might have by analyzing behavior on a social media platform.

In the paper "Smoke and Mirrors: Impact of E-cigarette Taxes on Underage Social Media Posting," published in Marketing Science, Vrinda Kadiyali, professor at the Samuel Curtis Johnson Graduate School of Management, and co-author Piyush Anand, assistant professor at the Jones Graduate School of Business at Rice University, sought to cut through the barrier to data for the underage category and uncovered some interesting findings.

Kadiyali and Anand looked at Instagram pictures from 2016 to 2018 to see if the number of posts about vaping had changed after a tax on vaping products was introduced in California. They figured that if they found fewer posts about vaping, especially from underage users, it might mean that the tax was working to reduce vaping among young people.

They chose Instagram because it is a popular social media platform, especially among people younger than 21. By looking at the pictures people post, researchers could get an idea of how much vaping was going on, especially among underage users. Their posting behavior is a potential proxy for consumption behavior.

The researchers used neural networks and deep learning models to analyze the pictures and figure out things like the age, gender, and race of the people in them. They found that after the tax was introduced in California, the number of posts about vaping by underage users decreased for about six months but then went back to normal.

"Our findings show us that the tax might have had some effect on stopping young people from vaping, at least for a little while," said Kadiyali, who is also the director of graduate studies for management in the Johnson School. "After six months, things returned to how they were before the tax was introduced. The discussions in California suggest vaping companies might have responded to this tax increase with their own increase in marketing activities, reducing the dampening impact of the tax on underage posting. California subsequently enacted a further tax to overcome these company actions."

The paper suggests that taxation could have some initial impact on reducing vaping among young people, but it might not be a long-term solution unless vaping and other newer tobacco delivery companies commit to protecting young people from the dangers their products pose.

"Managers of vaping products may want to pay close attention to our findings and think about how they can support higher taxes on vaping products to help protect young people," Anand said. "They should also consider monitoring social media to see if their products are being used by underage people and develop strategies to reduce it."

The researchers believe that regulators such as government officials should design a tax so that it has the biggest impact on reducing vaping among young people. And they should also keep an eye on social media to see if their policies are actually working.

"Our research shows that taxing vaping products could help reduce vaping among young people, but it's not a perfect solution," Kadiyali said. "We need to keep studying the issue and coming up with new ideas to protect young people from the dangers of vaping."

More information: Piyush Anand et al, Frontiers: Smoke and Mirrors: Impact of E-cigarette Taxes on Underage Social Media Posting, Marketing Science (2024). DOI: 10.1287/mksc.2022.0241

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To vape or not to vape: When an e-cigarette tax has an impact

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E-cigarettes have become a big concern for public health, especially when it comes to young people using these harmful products. The U.S. government has considered a tax on vaping products to discourage people, especially underage users, from vaping.

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US tobacco control in 2022 gets a mixed review from the American Lung Association

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US tobacco control in 2022 gets a mixed review from the American Lung Association

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US tobacco control in 2022 gets a mixed review from the American Lung Association | CNN

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Although fewer US adults are smoking cigarettes than ever, smoking remains the cause of the most preventable disability and death, and the nation's smoking regulations are getting mixed grades from the American Lung Association.

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