Relative Tax Rates, Proximity and Cigarette Tax Noncompliance: Evidence from a National Sample of Littered Cigarette Packs

39 Pages Posted: 31 Aug 2016 Last revised: 11 Mar 2023

See all articles by Shu Wang

Shu Wang

Michigan State University - Department of Political Science

David Merriman

University of Illinois at Chicago - Institute of Government and Public Affairs; Department of Public Administration

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2016

Abstract

We analyze data about cigarette tax compliance from the first national scale littered cigarette packs collection. We code each pack based on whether an appropriate tax had been paid at the location where it was found. Noncompliance across our 132 sample communities ranges from zero to one hundred percent with an appropriately weighted mean of 21 percent. We provide evidence that noncompliance is due to both cross-border shopping and cigarette trafficking. OLS and binomial logit regressions demonstrate that the financial incentive for non-compliance is the most important explanatory variable and has a statistically and quantitatively significant impact on noncompliance.

Suggested Citation

Wang, Shu and Merriman, David and Chaloupka, Frank J., Relative Tax Rates, Proximity and Cigarette Tax Noncompliance: Evidence from a National Sample of Littered Cigarette Packs (August 2016). NBER Working Paper No. w22577, Available at SSRN: https://ssrn.com/abstract=2832581

Shu Wang (Contact Author)

Michigan State University - Department of Political Science ( email )

East Lansing, MI 48824
United States

David Merriman

University of Illinois at Chicago - Institute of Government and Public Affairs

Chicago, IL 60607
United States

Department of Public Administration ( email )

400 S Peoria St.
2122 AEH (MC278)
Chicago, IL 60607
United States

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics ( email )

m/c 144 601 South Morgan St., Room 2103
Chicago, IL 60607-7121
United States
312-413-2367 (Phone)
312-996-3344 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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