State Flavor Ban Drives Users Elsewhere

Massachusetts’ ban on the sale of flavored tobacco products has shifted rather than reduced tobacco consumption, according to Ulrik Boesen, senior policy analyst with the Center for State Tax Policy at the Tax Foundation.
 
On June 1, Massachusetts’ ban on the sale of flavored tobacco products, including menthol cigarettes, took effect. At first sight, early data suggests a public health success: sales of cigarette tax stamps in the Bay State have declined 9.2 percent in the first half of 2020 compared to the same months last year.
 
However, sales of tax stamps in the Northeast region (Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) have remained stable in the first half of 2020, suggesting Massachusetts consumers are now buying their tobacco products in neighboring states.
 
From Jan. 1, 2020, to June 30, 2020, 311,848,000 stamps were sold in the region. For the same period in 2019, that number was 311,974,000. For June alone, sales actually increased from 53,877,000 in 2019 to 63,449,000 in 2020.
 
Tobacco tax collections, too, have shifted elsewhere, according to Boesen. In December last year, the Massachusetts Department of Revenue estimated the ban would decrease collections by $93 million in 2021. That revenue is now being collected by Massachusetts neighbors.
 
“It is not in the interest of Massachusetts to pursue a public health measure that merely sends tax revenue to their neighboring states without improving public health,” writes Boesen. “In addition, the ban on flavored tobacco highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.”