Increases in cigarette taxes and the resulting decline in tobacco use do not cause significant job loss (Liang et al., 2006; Warner and Fulton, 1994; Warner et al., 1996).
Tobacco growing and tobacco product manufacturing account for a small and declining share of economic activity in the United States, with most concentrated in the states of Kentucky, North Carolina, and Virginia (Liang, et al., 2006). Studies suggest that the economic presence of tobacco does not imply an economic dependence on tobacco. As cigarette smoking and the use of other tobacco products decline in response to higher taxes or other tobacco control efforts, the money spent on these products does not disappear from the economy but is instead spent on other goods and services, creating new jobs that offset lost employment in the tobacco sector.
Warner and Fulton (1994) were the first to carefully examine the net economic impact of reductions in tobacco use. Using a relatively sophisticated macroeconomic model, they simulated the impact of decreased tobacco use on employment and income in Michigan, assuming that reduced spending on tobacco products would be allocated to spending on other goods and services following existing consumer spending patterns in Michigan. Under a variety of scenarios, the researchers found a net positive economic impact in Michigan, resulting in new jobs and raising average incomes. Using a similar approach, Warner et al. reported on the impact of reduced tobacco use on the regional economies of the United States (Warner et al., 1996). They concluded that further declines in tobacco use would lead to a net increase in jobs in all non-tobacco-growing regions that would more than offset the relatively small decline in jobs in the tobacco-growing region.