Racial demographics and cigarette tax shifting: evidence from scanner data

Abstract

This paper examines the association between racial demographics and the shifting of cigarette excise taxes to consumer prices. Using scanner data on cigarette sales from 1687 stores across 53 American cities, 2009-2011, we found that cigarette taxes are shifted significantly less to consumer prices in cities with large minority (black and Hispanic) populations. The potential for price search behavior implies that our estimates understate the magnitude of the true relationship between local racial composition and cigarette tax shifting. Our finding suggests that increasing cigarette taxes may not be an effective means of reducing cigarette consumption in high-minority areas.