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Tobacco Product Prices Before and After a Statewide Tobacco Tax Increase
By Gina Johnson Goodhue County Tobacco Grant Coordinator
In 2013, the Minnesota State Legislature passed a tobacco tax increase that raised the combined cigarette excise and sales tax by $1.75 and increased the tax on non-cigarette tobacco products from 70% to 95% of the wholesale price. The journal article, Tobacco Product Prices Before and After a Statewide Tobacco Tax Increase, researches and explains “over-shifting”, a tobacco marketing tactic where companies increase ones’ prices on top of new taxes and blame the government.
An observation study of tobacco retail prices was performed in a sample of 61 convenience stores in Minnesota, North Dakota, South Dakota, and Wisconsin. Six rounds of data were collected between May 2013 and January 2014.
The Four Corners Partnership participated in this study in all four counties (Dodge, Goodhue, Rice, and Steele) as well as Wisconsin. The study involved 6 rounds of tobacco purchasing. Rounds 1 and 2 were conducted before the Minnesota tobacco tax increase went into effect on July 1, 2013. Round 3 was completed one week after the tax increase and Round 4 was conducted four weeks after the tax increase took effect. Round 5 was conducted one and half months after the increase and Round 6 was conducted during the week of January 13, 2014, which was two weeks after the minimum moist smokeless tobacco tax went into effect.
In Minnesota, after implementation of the tax increase (R. 3-6) the average prices paid for both of the cigarette products and both of the smokeless tobacco products were significantly higher than average prices paid before the tax increase (R. 1-2). In contrast, the prices paid for tobacco products in the bordering states, which did not have a tobacco tax, did not change significantly during the same time period.
In other words, the cigarette industry used the tax increase as an opportunity to increase retail prices. Of the two cigarettes studied Marlboro Gold cigarettes were observed to have the biggest over-shift of ($.14) after the tax was implemented. Camel Blue cigarettes were also observed to have an over-shift of ($.06)
This study is important for us to understand how the tobacco industry can manipulate policies in their favor. Increasing the tobacco tax is one of the most effective tobacco control policies available. Studying over-shifting and other tobacco industry tactics is important in making sure that the policies are implemented effectively.
Tobacco Product Prices before and After a Statewide Tobacco Tax Increase. Betsy Brock, Kelvin Choi, Raymond G Boyle, Molly Moilanen, Barbara A Schillo. Tob Control 2016;25:2 166-173 Published Online First: 6 January 2015 doi:10.1136/tobaccocontrol-2014-052018
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The Four Corners Partnership is a coalition of concerned citizens and local organizations coordinated by the Public Health Services in Dodge, Goodhue, Rice and Steele counties. The goal of the Partnership is to reduce the harm caused by tobacco in our four-county region. Funding for this work comes from a grant from ClearWay Minnesota.
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