Cigarette smoking among individuals with low incomes is more responsive to price than is cigarette smoking among people with high incomes. Given the relatively high prevalence of smoking in low-income populations, this greater price sensitivity suggests that increases in cigarette taxes and prices can be particularly effective in reducing disparities in the burden of disease caused by tobacco use (CDC, 2008; Murray et al., 2006; Farrelly et al., 2001; Ross and Chaloupka, 2006; Townsend et al., 1994).
People with lower incomes are more likely to smoke and to die from causes related to smoking (CDC, 2008; Murray, et al., 2006); but other researchers found that they are also more likely to respond to price increases (Farrelly et al, 2001). These findings suggest that increases in cigarette excise taxes can be highly effective in reducing observed disparities in the health consequences caused by tobacco use.
Moreover, while the burden of existing cigarette excise taxes falls most heavily on lower-income smokers, their greater sensitivity to price increases suggests that higher taxes will lead to greater reductions in smoking among people with lower incomes than among those with higher earnings. One study reported that individuals living below the median income level were about four times more responsive to price increases than were those with higher incomes (Farrelly et al., 2001). These conclusions have been supported by other studies that examined differences among groups based on socioeconomic status and educational attainment, as well as studies that reported on the impact of price on smoking in low-, middle-, and high-income countries (Ross and Chaloupka, 2006).
The conclusions of these and other studies imply that increases in cigarette and other tobacco product taxes will lead to disproportionate reductions in tobacco use among low-income persons, which may at least partially reduce the regressivity of taxes on tobacco products.
When considered in the context of the broader fiscal system, the impact on low-income communities can be reduced further if the revenues generated from increased cigarette taxes are used to expand access to health care, or to prevent or treat addiction to tobacco (e.g., Medicaid coverage of smoking cessation counseling and pharmacotherapies).