Unintended Consequences of Taxation: Cigarette Taxes and Food Stamp Take-Up

Kyle Rozema, Cornell University

This paper investigates a previously unexplored strategic response to taxation: whether cigarette excise taxes increase the take-up of the Supplemental Nutrition Assistance Program (SNAP). First, we show theoretically that increases in cigarette taxes can induce non-enrolled eligible smoking households toenroll in SNAP. Second, we study these predictions empirically using the Current Population Survey (CPS) and the Consumer Expenditure Survey (CEX). A $1 increase in state cigarette taxes increases cigarette pack prices by $0.72 and smoker households’ annual cigarette expenditures by $150 to $200. Then we provide evidence that a $1 increase in taxes increases food stamp take-up by about 15% among eligible smoking households.

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Presented in Session 133: Social Policy, the Social Safety Net, and Inequality