8 Reasons Why a Menthol Cigarette Ban Should Go In the Ash Heap of History

A little over a month ago, the Food and Drug Administration (FDA) released a proposal to ban menthol cigarettes. Why go after menthol cigarettes specifically? As Harvard University points out, menthol is an agent added to cigarettes to create a cooling sensation that masks the harshness of cigarette smoke. There are bronchodilatory properties that allow for deeper penetration of cigarette smoke into the lungs. Because these cigarettes are smoother and easier to smoke, Harvard University points out that there is greater potential for addiction. By removing a more addictive version of cigarettes off of store shelves, the FDA hopes to reduce tobacco deaths, which are a leading cause of death in the United States. The CDC found that about one in five deaths (or 480,000 deaths) are caused from tobacco smoking. If a menthol cigarette ban could make a major dent in tobacco-related deaths, perhaps a ban could be justified, or so goes the argument. However, as we shall see shortly, the argument for a menthol cigarette ban is nowhere as credible as it seems at first glance. 

1. Past menthol cigarette bans do not have a great track record of reducing smoking. The Canadian banned menthol cigarettes in October 2017. This is significant because Canada is the country with the longest enacted menthol cigarette ban. Prior to 2017, menthol cigarettes were enacted on a province-by-province bases. How did their ban turn out? According to a study from BMJ Journals, 21.5 percent quit smoking. 59.1 percent switched to non-menthol cigarettes and 19.5 percent still smoked menthols (Chung-Hall et al., 2021). Keep in mind that a social desirability bias (i.e., a response bias in which the respondent wants to give an "acceptable" answer) is in play and could very well be over inflating the quit rates. Plus, there is nothing to be said about the possibility of relapse. 

A study from the National Bureau of Economic Research (NBER) diminishes the BMJ Journals' findings (Carpenter and Nguyen, 2020). Although menthol cigarette sales dropped, non-menthol cigarette sales were unaffected. There was no net effect on youth smoking rates because of substitution, which is noteworthy since the FDA made particular mention of youth in its proposal. For adults, there was more evasion than substitution. Instead of going for non-menthol cigarettes, adults purchased menthol cigarettes from areas in Canada that did not have the menthol cigarette ban. In either case, the ban did not have "any significant effects on population rates of cigarette smoking or quit behaviors for either youths or adults." 

Massachusetts is another example of these phenomena. Massachusetts is the only U.S. state to have banned menthol cigarettes, which has been part of a greater ban on flavored cigarettes. Yes, it is true that menthol sales in Massachusetts plummeted. What is also true, which the Tax Foundation illustrates, is that Massachusetts-based menthol cigarette smokers travelled to other states to get their menthol cigarettes. This form of evasion all but completely negated the effects of Massachusetts' flavored cigarettes ban.

In 2020, the European Union banned menthol cigarettes. According to a post-ban survey conducted by the Foundation for a Smoke-Free World, only eight percent of menthol smokers in eight European countries quit menthol smoking. As a side note, the University of Waterloo estimates that 1.3 million people would quit with such a ban (Fong et al., 2022). With an estimated 30.8 million smokers in the U.S. (CDC), that would mean a quit rate of 4.2 percent, which is an even lower quit rate than the EU post-ban survey suggests.

I do want to caveat that the data and findings from past menthol bans have their limits. The ban in the European Union is too recent to draw anything too definitive. The data we have on the Canadian menthol ban was prior to 2018 when menthol cigarette bans were on a provincial level in Canada. What the FDA proposes is on the federal level. At the same time, the experiences of Canada and Massachusetts show that demand for menthol cigarettes is high enough where people are willing to find workarounds, whether that is in the form of substitution or evasion.

2. A ban would drive menthol cigarette smokers into underground markets. Since we do not have data from national-level menthol cigarette bans, the best proxy we have is what happens when the government bans a widely-used product in the name of public health. Look at the War on Drugs or the prohibition of alcohol. Those bans did not reduce demand. They gave criminal dealers greater power while driving consumers into underground markets with riskier products. For more on the economic, health, and enforcement costs of the War on Drugs, you can read this Cato Institute policy brief here. 

This country already has an illicit tobacco market that accounts for 8.5 to 21 percent of the U.S. tobacco market, according to the National Academies of Science. Given that a) menthol cigarettes accounted for 37 percent of cigarettes smoked in the U.S. from 2019 to 2020 (CDC), b) the menthol cigarette market has a large customer base, and c) menthol cigarettes are a profitable product, international cartels and U.S.-based gangs are going to want to seize that opportunity to make more money. As such, it is reasonable to assume that such a ban would likely create a larger market for illicit cigarettes while driving cigarette smokers towards an even unhealthier cigarettes, as well as possibly towards harder drugs. 

3. Menthol cigarettes are not more dangerous than non-menthol cigarettes. The Journal of National Cancer Institute found that a menthol smoker's risk of cancer is lower than that of a non-menthol cigarette smoker (Rostron, 2012), which is an interesting finding considering this is the report that the FDA cited in its recent proposal. The risk of lung cancer could be up to 30 percent lower for menthol cigarette smokers versus non-menthol cigarette smokers (Blot et al., 2011). This might have to do with the fact that menthol smokers smoke fewer cigarettes a day (ibid.). In 2020, the U.S. Surgeon General admitted that there is not adequate evidence to infer that menthol cigarettes are more dangerous than non-menthol cigarettes (p. 12). 

4. Menthol cigarettes are not more addictive than non-menthol counterparts. Advocates for a ban stipulate that one of the issues with menthol cigarettes is that they are more addictive. However, that seems to not be the case. A 2022 study from the Journal of the National Cancer Institute, which was released a couple of months ago, entailed a large-scale study of 16,425 smokers. This study revealed similar quit rates between menthol and non-menthol smokers (Munro et al., 2022). Furthermore, there is not even a positive relationship between the distribution of menthol cigarettes and youth smoking rates (Bentley and Rich, 2020), which further undermines the argument that menthol cigarettes are more addictive.

5. A menthol ban would exacerbate disparities in criminal justice. According to the FDA, 85 percent of African-American smokers use menthol cigarettes, as opposed to 47.7 percent of Hispanic smokers, 41.1 percent of Asian smokers, or 30.3 percent of Caucasian smokers. Yes, smoking menthol cigarettes is an unhealthy habit, regardless of the race or ethnicity of the smoker. But it has also been a perfectly legal habit disproportionately enjoyed by African-Americans. Proponents of a ban argue for health benefits (especially for the African-American community), although that argument has been refuted above (See Points #3 and #4). 

What becomes an issue is that for a ban to take into full effect, it needs to be enforced. Who is going to enforce this ban? Local police officers, amongst other actors. A menthol cigarette ban would give law enforcement a reason to interact with individuals committing a victimless crime. Since menthol cigarettes are disproportionately smoked by black smokers, the brunt of the police enforcement of that ban will be in black neighborhoods. As the ACLU illustrates, a menthol cigarette ban will "disproportionately impact people of color, as well as prioritize criminalization over public health and harm reduction." Not only will there be more police enforcement, but criminal activity and violence will increase, especially in black neighborhoods (See Point #2). As we will see below (Point #6), there are better ways to lower smoking rates than a menthol cigarette ban. 

6. Menthol cigarette bans are not necessary when we have alternatives. As previously pointed out (Point #2), prohibition is a drastic, draconian response with multiple unintended consequences. The response makes even less sense when there are other viable options. There are patches, nicotine gum, or heat-not-burn devices that are alternatives. More to the point, e-cigarettes are shown to be a safer alternative to traditional cigarettes. Cochrane, which is a revered global group of health researchers, also found that e-cigarettes are more effective in helping with smoking cessation than traditional means (Hartmann-Boyce et al., 2020). Our focus should not be on criminalization, but incentivizing smokers to either find other methods to quit or at least use less damaging alternatives such as e-cigarettes (i.e., harm reduction).

7. Menthol cigarette bans come with costs. In public policy, there are no silver bullets. Public policy is about tradeoffs and whether or not the benefits have an acceptable cost. Calling for a menthol cigarette ban is not as simple as "saving lives." Even something as noble as saving lives or improving quality of life for current smokers has a cost. As already alluded to, there are going to be increased costs to enforcing the ban and the other costs related to the criminal justice system (Point #2). There will be the cost of increased criminalization and violence as a result. There is the matter of lost tax revenue. The Tax Foundation calculates that this will cost $6.9 billion of federal and state tax revenue during the first year of implementation (Boesen, 2022). There are also the costs of economic output and the jobs of manufacturers, wholesalers, and retailers of menthol cigarettes (see NYC-specific study here).

The costs as it relates to healthcare are not as straightforward. I brought up this point a decade ago when analyzing a cigarette sin tax in California. The Attorney General's Office (AGO) of California realized that disincentivizing smokers has a cost. If a smoker ceases being a smoker and lives longer, that means incurring future costs for healthcare and social services that would not otherwise be incurred. As such, the net fiscal cost is unknown (AGO, p. 17). As we will see below (Point #8), the decision as to whether one risks dying sooner from smoking or lives longer is not up to the FDA, but up to said individual.

8. Adults should smoke whatever cigarette they would like. This isn't the 1950s when smoking was commonplace and society was unaware of the unhealthy effects. We have education on the effects of smoking, public health campaigns, excise taxes, and indoor smoking bans, all of which exist to deter smoking. If people decide to smoke in spite of all of these deterrents, that is their choice. As the Reason Foundation brings up, "Adults in a free society should be allowed to make their own calculations of costs and benefits when it comes to what they put in their bodies, so as long as they are not harming others." 

Menthol cigarettes do not provide an additional threat in comparison to their non-menthol counterparts, so why should the government ban them? If the government is going to be this paternalistic, what's next? Should the CDC go around mandating that we all exercise three times a week or that we eat daily five servings of fruits and vegetables because obesity rates in this country are so high? Most Americans do not get enough sleep. Maybe the government should monitor our sleeping behaviors and mandate how much sleep we should get. There is no overriding, substantiated public health rationale that can justify such paternalistic intervention, and that includes a menthol cigarette ban.  

Postscript

To recap, menthol cigarettes are not shown to be more dangerous or addictive than non-menthol cigarettes. The evidence we have on menthol bans do not show they are particularly effective in lowering smoking rates. Instead, we see a large amount of substitution and evasion. It does not make sense to ban menthol cigarettes when we have other methods to lower smoking rates that do not involve the heavy costs and unintended consequences of prohibition. If the FDA does indeed end up criminalizing menthol cigarettes, it would be a step backwards both for public health and criminal justice. 

Is There a Vaping Epidemic Among Teens?: The Policy Implications of E-Cigarettes for Teenagers

Ever since smoking electronic cigarettes, also known as "vaping," emerged on the scene, it became quite the controversial practice. Much of the debate surrounds harm reduction versus the precautionary principle. Are e-cigarettes a safer alternative for people? Should we be safe rather than sorry? I have analyzed e-cigarettes on this blog on a couple of occasions (see here and here). My conclusion was that the harm reduction principle is the more convincing of the arguments, that is to say that e-cigarettes are the less harmful (and thereby less evil) of the options. Allowing people a safer alternative to traditional cigarettes sounds like a win-win (maybe not for tobacco companies, but surely the consumers).

It might not be a win for everyone, especially teenagers. Only yesterday did the federal government issue a press release on its findings from its Monitoring the Future survey. One of the main findings is that teen e-cigarette usage increased from 11 percent in 2017 to 21 percent in 2018. This is significant because it is the largest year-to-year increase for any adolescent substance abuse outcome in the 43 years the survey has been conducted.

That might not sound so bad since e-cigarettes are less harmful than traditional cigarettes. However, combine that finding with an article that research organization Rand Corporation released yesterday on teen vaping. The article argues that for this sub-segment of e-cigarette consumers, e-cigarettes are more harmful because e-cigarettes lead to increased likelihood to smoke traditional cigarettes. The Rand Corporation cited a meta-analysis corroborating their theory (Soneji et al., 2017). From a public health standpoint, this is something serious to consider. When looking at e-cigarettes for adults, the idea is the adults go from consuming something more harmful to something less harmful. If e-cigarettes are indeed a gateway to traditional cigarettes, the introduction of e-cigarettes could be harmful to future adults.

In order to understand the trends with vaping, we need to understand the trends of traditional cigarettes, as well, because e-cigarettes and traditional cigarettes are substitute goods. This is important because the question is whether e-cigarette usage among teens causes an increase of tobacco consumption, a decrease, or has no real effect. According to the Centers for Disease Control and Prevention's (CDC) and its most recent survey data of tobacco use among middle and high school students, overall tobacco use for high school students has actually declined.

The CDC found that tobacco consumption was on the decline for middle school students, as well (see below).

How do we deal with the seemingly contradictory findings between the CDC and the Rand Corporation? Through an article in Tobacco Control that was co-authored by Georgetown University public health researcher David Levy (Levy et al., 2018). While e-cigarettes smoked by youth are associated with "an increased risk of ever using [traditional] cigarettes (smoking) and moderately associated with progressing to more established smoking," the report also found that "recent increases in vaping have been associated with declining rates of youth smoking."

In short, what the data tell us is that although the introduction of e-cigarettes makes it likely for some teenagers to smoke, the overall trend is that e-cigarettes reduce the probability that teenagers smoke tobacco products. Combine that with the fact that the British government found that e-cigarettes are 95 percent less harmful than traditional cigarettes, and the argument of e-cigarette opponents go up in smoke. I hope that people take a closer look at the data instead of demonizing a product that has the ability to save hundreds of lives.

Why Trump Should Reverse Obama-Era E-Cigarette Regulations

I need a break from critiquing Trump's latest barrage of executive orders and policy recommendations. Instead, I would like to take a look at the previous Obama administration's bad policies and see what Trump could do. The policy that is of interest today is that of electronic cigarettes, more colloquially known as e-cigarettes. At the end of his second term, the Obama administration's Food and Drug Administration (FDA) created additional regulations on e-cigarettes by extending the regulations of the Family Smoking Prevention and Tobacco Control Act of 2009 to e-cigarettes. The FDA's mentality was "if it looks like a cigarette and acts like a cigarette, it must be a cigarette." That assumption defies common sense because e-cigarettes don't contain tobacco (even though some of the nicotine for e-cigarettes can be extracted from tobacco), they don't create the problems of second-hand smoke that regular tobacco products do, and the carcinogens tars and gases in regular tobacco products are absent from e-cigarettes. Those differences right there make me wonder what the FDA was thinking or even why we need as much regulatory oversight as regular tobacco products. However, we have to contend with the reality that the regulations exist. The question is whether they should still be in play.

Let's forget for a moment that the regulatory barrier of costing $1 million for each FDA application to approve a given product, which would de facto put the 90 to 99 percent of e-cigarette producers out of business. The primary concern about e-cigarettes is the health concern, mainly that they are comparably bad for one's health as regular tobacco products. I looked at the topic of e-cigarettes about three years ago. At the time, e-cigarettes were a new phenomenon, and research on the topic was still preliminary. Even with preliminary evidence, the academic literature at the time was showing that e-cigarettes are less harmful than regular cigarettes. What more recent academic literature can we add to the list?

• Cancer Research UK released a study earlier this month about e-cigarettes. This study is significant because it is the first one to adequately measure the long-term effects of e-cigarettes. They were not about to say that e-cigarettes are completely harmless because let's be honest: any activity comes with at least some risk, no matter how small. However, using a comparison group of those who go through nicotine replacement therapy (NRT), e-cigarettes are about as safe as NRT, which means that e-cigarettes are much safer than regular tobacco products.  
• A 2015 study from Public Health England, which is the United Kingdom's equivalent of the U.S.' Department of Health and Human Services (HHS), shows that e-cigarettes are 95 percent safer than regular cigarettes. 
• The University of Victoria made public its study on vaping in January 2017. Not only is there no gateway effect in terms of bringing people over to regular tobacco products, but it is as effective as other NRT devices used to quit smoking. Also, the vapor from e-cigarettes is less harmful than cigarette or cigar smoke. 
• The Royal College of Physicians stated in its 2016 findings that "the public can be reassured that e-cigarettes are much safer than smoking."
• A 2017 study from the Irish government shows that e-cigarettes provide smokers a better chance to quit smoking. 
• In April 2016, seven top international tobacco experts urged the FDA to keep an open mind on e-cigarettes. They illustrated their point by synthesizing current data to show the potential harm reduction in using e-cigarettes (Levy et al., 2016). 
• Here are a list of studies showing how e-cigarettes can assist smokers in quitting smoking: Delnevo et al., 2016; Levy et al., 2016; O'Brien et al., 2015; Polosa et al., 2015; Rahman et al., 2015; Adriaens et al., 2014; Polosa et al., 2014.
• Looking at CDC data on youth tobacco use for 2011-2015, we see that e-cigarette use increased. The plus side is that e-cigarettes were substituted for cigarettes and cigars (see below), both of which have higher risk to consumers. Furthermore, cigarette consumption for youths has been on the decline since 2008, which is around when e-cigarettes started to trend in the market.

Am I here to say that e-cigarettes are harmless? No. If you haven't started smoking e-cigarettes or conventional cigarettes, I wouldn't recommend it. At the very least, nicotine has addictive qualities. However, given that current academic literature shows benefits of e-cigarettes, it seems foolhardy for the FDA to take on an abstinence-only approach with such an important health issue. The government over-emphasizes potential risk to children while ignoring the harm-reduction benefits. Even if we want to see whether a small subset of teenagers or adults are harmed in the long-run (although current evidence shows that e-cigarettes are about as safe as NRT), we would have to wait for another 40 years to be absolutely certain. In the meantime, 36.5 million smokers in the United States do not have access to a low-risk alternative to smoking, which is the leading cause of preventable death in the United States. These 36.5 million individuals risk the potential of losing an average of 20 years of their life (Holford et al., 2014). It is not realistic to prevent every smoking-related death, but rather to prevent as much as possible. That is where tobacco harm reduction comes into play (see R Street policy brief here for policy alternatives). If it remains law, Obama's e-cigarette policy has the potential to hasten the deaths of thousands of Americans. Trump said that he wanted to cut the red tape for FDA pharmaceutical approval in order to save lives. Let's hope he applies that same thought process to current e-cigarette regulations.


10-14-2017 Addendum: Here is another study (Levy et al., 2017) modeling how vaping could save 6.6 million lives over the next ten years.

7-31-2019 Addendum: A recently released study from the National Bureau of Economic Research researched the effects on pre-pregnancy and pre-natal smoking. The findings were two-fold. One, an e-cigarette tax creates a substitution effect, i.e., it incentivizes pregnant women to smoke traditional cigarettes instead of the intended outcome of no smoking. Two, e-cigarettes reduce overall pre-natal smoking.

11-16-2021 Addendum: We continue to see the substitution effect of e-cigarettes. In response to the Democrats' proposed nicotine tax, Professor Michael Pesko has detailed his NIH-funded research on the topic. He found that if we increase e-tax cigarettes, we will actually increase the number of teen and adult smokers of traditional tobacco products. 

Holy Smoke, an E-Cigarette Ban in Los Angeles!

This past Saturday, the City of Los Angeles enacted a ban on electronic cigarettes, also known as e-cigarettes. Proponents of the ban think that e-cigarettes are too close to the real thing, whereas opponents argue that e-cigarettes are nowhere near the nuisance that regular cigarettes are. A few months ago, I had made a libertarian argument that partial smoking bans in public places were actually justifiable. The question I have to ask here is whether e-cigarettes have the same externalities as regular cigarettes or if e-cigarettes are merely mimics of real cigarettes.

Upon answering the question of whether the City of Los Angeles should have passed an e-cigarette ban, we should first ask ourselves what an electronic cigarette is and how it differs from a regular cigarette. An electronic cigarette is a cigarette-shaped, battery-powered, cylindrical tube that vaporizes liquid nicotine. The major emission from an e-cigarette is nicotine; e-cigarette "vaping" does not entail combustion, which removes the negative externality of imposing second-hand toxins unto others. The other major carcinogens, the ones make tobacco smoke such a negative externality and harm one's health, are essentially non-existent. I know that e-cigarettes are still a new enough of a development where one could argue that conclusions from e-cigarette studies are premature.

However, there is an increasing amount of academic literature that show that e-cigarettes are less harmful than regular cigarettes, which makes sense because e-cigarettes not only lack the carcinogens and tars that are in tobacco products, but they also have smaller concentrations of nicotine than a regular cigarette (also see Oxford study here), which means that they are healthier (Polosa et al., 2013; Waegner et al., 2012; Cahn and Siegel, 2011) and can be used to reduce the smoking of tobacco products (Polosa et al., 2011; Siegel et al., 2011; CDC, 2013). Additionally, what is lacking is the evidence showing that there are second-hand smoke impacts from this vapor (Burstyn, 2013; McAuley et al., 2012), not to mention the emissions from e-cigarettes are by and large non-offensive, which is why e-cigarettes have been immune from cigarette bans prior to. I can also cite a recent study at the Lancet (Bullen et al., 2013) that suggests that e-cigarettes can be just effective as nicotine patches, which means that they can be used to wean people off of tobacco products.

Just because electronic cigarettes look like cigarettes and use the word "cigarette" does not make it a tobacco product that has the same level of harm of traditional smoking products. E-cigarettes have the nicotine that smokers crave, but it comes without the toxins from tobacco smoking. If we are to aim for the goal of national harm reduction, which is important because tobacco smoking kills many individuals per annum, we should not stub out e-cigarette smoking with e-cigarette bans. Instead, we should find a way to encourage smokers to use these healthier alternatives so smokers aren't killed by the real culprit of tobacco.

5-3-2016 Addendum: The latest and greatest in studies point out why we shouldn't ban e-cigarettes is from the Royal College Physicians in the United Kingdom. To summarize the study, e-cigarettes come with huge harm reduction, and is the next step towards a more tobacco-free society. 

A Libertarian Argument in Favor of Smoking Bans in Public Places

Ever since the colonial days, smoking tobacco has been a part of American history. Until recent times, smoking was common practice amongst many Americans. Once we realized the side effects of smoking did social norms regarding smoking change for the better. One of the ways in which we see that societal shift is in smoking bans in public places, which ironically enough, include privately owned establishments (e.g., clubs, bars, restaurants). If it is a public domain, such as a government building or a public university, then I do not have a problem with a smoking ban. When we are talking about privately owned establishments, that is the moment I start to take issue with a smoking ban. Normally, I would simply say that a business owner should be able to self-regulate his own property because we are in a free society. However, I cannot treat this like any normal governmental intervention. How so? Unlike so many other policies, this one actually works. A smoking ban creates a cleaner environment, it reduces exposure to second-hand smoke both to customers and employees, has generally high compliance rates, and it does so without causing net economic damage. Plus, it is nice to go somewhere like a restaurant or bowling alley and not have deal with inhaling cigarette smoke or come home smelling like an ashtray. Regardless about how I personally feel about allowing smoking in privately owned establishments, from a philosophical and deontological standpoint, I feel uncomfortable using public policy to coerce business owners into certain business-related decisions, even if this one would be a particularly lousy decision. What I would like to explore is whether the wishes of the proprietor trump any other considerations or whether some other factor(s) can supersede the decision to allow for smoking in one's private establishment.

Economic effects on businesses: One of the arguments used against smoking bans is that it will impose extra costs and drive business away. There are certain businesses that are more adversely affected, such as casinos, taverns, and bingo halls. However, once revenue and employment data are aggregated, the vast majority of studies show that a smoking ban hardly has an effect, and could very well improve the establishment (Alamar and Glantz, 2004). As the St. Louis Federal Reserve points out, the effects both on employment rates and business' revenue are aggregately, at best, negligible. The National Institutes of Health (NIH) also found that there are no negative economic effects on employment or sales. (Also, see the MN House of Representative's Office, Centers for Disease Control and Prevention [CDC], Bartolome and Irvine [2010]). The fact that a government ban can be implemented without negatively impacting a business is, in my humble opinion, quite impressive.

Health care costs: Those who are in favor of smoking bans argue that it will not only cut back on inhalation of second-hand smoke, but will also cut back on people who actually decide to smoke. Let's suppose that the partial ban succeeds in decreasing the amount of smokers, which they do (Evans et al, 1996). Much like I illustrated with the cigarette tax, decreasing the number of smokers would not automatically translate into less health care costs. For one, if an individual dies earlier due to smoking-related illnesses, that individual could have very well avoided huge bills caused by elderly care and living. Also, there is more than one way to contract an illness, or to put it another way, there can be another way to get sick that can just as easily cost as much, if not more, than a smoking-related illness. As such, one cannot definitively determine net health benefits due to a smoking ban in public places.

The negative externality of second-hand smoke: A negative externality is economic parlance for saying that a firm or business makes a decision that creates an impact in which an individual or group of individuals did not [fully] consent to the decision [and its effects] voluntarily. Eliminating or decreasing a negative externality is the most legitimate use of any government intervention because it mitigates a market failure that the market cannot solve. In this case, the negative externality in question is second-hand smoke, which is the primary issue that smoking bans address. Let's face it: second-hand smoke is a real health risk that causes an increased risk of all sorts of diseases.

To what extent does the externality of second-hand smoke actually effect other people? Air and water pollution, for example, affect public goods. Smoking bans, on the other hand, primarily target the private sector. If a consumer does not like the fact that smoking is allowed in a given restaurant or bar, they can go to one where it is not allowed. Considering that 55% of Americans are in favor of a smoking ban, and this number does not even include other people who like smoke-free areas but are not as gung-ho to call for government intervention, I am willing to make an educated guess that most Americans want smoke-free establishments. If a customer is so opposed the fact that smoking is allowed in a given establishment, that customer will switch over to a competing business. So, if the demand for smoke-free establishments is climbing and climbing, then there might not even be a need for smoking bans in the long-run. Why? Businesses will realize that customers do not want to enter a smoke-filled establishment with ashtrays and cigarette butts everywhere. Unless a business wants to cater specifically to smokers, the proprietor will most likely prohibit smoking on the premises because bringing in the larger constituency of non-smokers translates into more profit. Either way, a business owner will either adjust accordingly to customer needs or go out of business.

Customers usually have the luxury of choosing an alternative provider for a given good or service so they can avoid the second-hand smoke. The same cannot be said for an employee, especially when the employer is making these decisions. A lot of the employees affected by the second-hand smoke are in the hospitality and entertainment sectors, and odds are that these jobs do not pay well. In a world with strictly competitive labor markets and no unemployment beyond the natural unemployment rate, I would argue that if the employee didn't like that they worked in a working environment with cigarette smoke, much like the customer, they could go elsewhere and simply find another job. It sounds like nice economic theory. The problem is that we do not live in that kind of world. We live in a world with real unemployment problems that affect people. The less education, experience, and skills one has, the more difficult it is to find a job. Since a great majority of these jobs are low-skilled, it is not that easy to "bounce back" or ask one's boss for a raise to financially compensate the additional risk taken for being exposed to second-hand smoke. The labor markets have labor rigidities, which is to say that it is not that simple to quit a job and find a new job if second-hand smoke is deemed to be that bothersome and detrimental to one's health. To paraphrase the Surgeon General (see Ch. 10), there is a legitimate negative externality on employees with regards to one's health (also see Meyers et al, 2009, which shows that smoking bans mean decreased rate of heart attacks), which is a clear violation of the non-agression axiom.

Conclusion: As can be seen throughout my blogging history, I would normally consider telling a proprietor what to do with their private property to practically be anathema. However, I have to remind myself that I am a consequentialist libertarian who believes in limited government. Aside from being a logical fallacy, I do not want to entertain a rebuttal based on the slippery slope argument because a partial smoking ban does not, in practice, translate to the government intervening in every facet of one's health.

When asking myself whether the government should intervene, I'm certainly not as simple-minded as "Of course the government should intervene! It can solve all of our problems." I first ask myself whether there is an actual market failure. If there is, I ask if there is a market solution to said market failure. If I realize that there is no market solution, I ask if there is a government solution that works. Typically, I find that such a solution does not work in practice. The point to make here is that in this case, a partial smoking ban works. 

I can think of alternative policies that can be implemented to potentially address the same issues. If an establishment decides to have both a smoking and non-smoking section, the government can mandate that there is a high surcharge or tax for sitting in the smoking section. That tax revenue can be collected to somehow compensate those who are exposed to second-hand smoke. The government can also provide an alluring enough of a tax credit to voluntarily ban smoking in an establishment, although where are we going to get the money? I could suggest that there is a licensing scheme in which an establishment would have to pay an exorbitant amount to allow for smoking, but that would be more difficult to regulate. Establishments could put up a sign for second-hand smokers warning them about the dangers of second-hand smoke, but effectiveness would be minimal. These alternatives might somewhat work, and could be used in concert with a partial smoking ban, but it would not be as effective as the partial ban (Hoffman and Nell, 2012). In summation, there are certain situations that merit reasonable, limited regulation, and given the nature of the negative externality, a partial smoking ban is one of those situations.

Proposition 29: Is a Sin Tax on Cigarettes a Good Idea?

Next week on June 5th, California is going to vote on Proposition 29 (also known as the Tobacco Tax for Cancer Research Act), which is a referendum to enact a tax hike on cigarettes. The hike is supposed to be five cents per cigarette, which translates into a dollar per pack. The tax revenue collected would go towards cancer research, which is something the proponents of Prop 29 laud because the tax is supposed to cut back on the number of smokers while heading in the right direction to cure cancer. The opposition is not only worried about a higher level of tax burden, but that the bill would have unintended consequences. So who is right? Let's take a look:

1) Sin tax and tobacco. Before going into the bill itself, we need to differentiate between a Pigovian tax and a sin tax because there are some people out there who think they are synonymous. A Pigovian tax is a tax levied to abate a negative externality (see diagram below).

 
The classic example of a negative externality is pollution. A factory dumps waste into a river or pollutes the air. Society bears the cost because the water and air are now dirtier. Without the Pigovian tax, the factory does not bear any cost for the pollution. By enacting the Pigovian tax, the producer produces less of their product at the social optimum, which ideally is where P = MR = MSB.

I do not want to get into a discussion right now of whether such a tax is acceptable from a libertarian standpoint because it would be a debate of whether the government's non-action would violate the libertarian axiom of non-agression. Rather, I would like to contrast the Pigovian tax to the sin tax. As economist Greg Mankiw states, "A Pigovian tax is supposed to protect innocent by-standers from the actions of others," whereas sin taxes "try to protect people from themselves." To clarify, a Pigovian tax tries to lower social costs and a sin tax tries to lower individual costs. Sin taxes are not solely levied on cigarettes; they are also levied on alcohol and are being attempted on soda. The sin tax is the government making the moralistic statement of "Hate the sin, Tax the sinner" that goes well beyond nonaggression. If the individual's smoking doesn't adversely affect others, who are we to deter voluntary behavior? Such action would be a violation of "life, liberty, and pursuit of happiness."  

2) The harmful effects of tobacco. New York mayor Michael Bloomberg was in support for such a bill because "tobacco kills." I'm not unsympathetic to the lives lost because of tobacco-related illnesses, but last time I checked, tobacco is an inanimate agricultural product that people consciously decide to consume. Tobacco contains nicotine, which happens to be addictive. Addictions are not easy to kick, but there are ways to quit. There is medicine (e.g., Nicotine patch, Nicotine gum), counseling services, and support groups such as family, friends, or Nicotine Anonymous. Even if the treatment costs some money now, it will cost a lot less than paying for the habit, not to mention that you can greatly reduce your chances of getting lung cancer later down the road. Plus, if people don't want to quit smoking, who cares whether it's addictive? People choose whether to smoke or not, and if they have already started, they can choose whether they want to quit or not. Rather than treat individuals like children or as if they had no choice, let us treat individuals like adults who have free will.

Tobacco consumption is not only harmful to our health, but also to our wallets. The line of thought is that because people stop smoking (i.e., they'll be healthier), health care costs are going to drop by $5.1B. However, as the legislative analyst from the Attorney General's Office points out (p. 17), "This measure would have other fiscal effects that offset these cost savings. For example, the state and local governments would incur future costs for the provision of health care and social services that otherwise would have not occurred as a result of individuals who avoid tobacco-related diseases living longer. Thus, the net fiscal impact of this measure on state and local government costs is unknown."

3) Sticking it to the poor. I would take an educational guess that a majority of the proponents of this bill lean to the Left because a) those on the Left are more enamored with tax hikes, and b) this is California we are talking about, after all. This means that these are most probably the same people who want to help the downtrodden. However, this is just yet another policy from the Left in which we see an unintended consequence. Why? Because the poor and uneducated are more likely to smoke. This can be observed both on the national and state level. It is difficult enough in general to stop smoking. Being poor and/or uneducated makes it more difficult to reach that goal. And now proponents want to throw the burden of an additional regressive tax on top of it all that would take more out of their discretionary income? That's just great.

4) How worried should Californians be? The federal government already throws $5 billion (yes, that's billion, with a "b") at cancer research per annum; that doesn't even count the state level or any private organizations funding cancer. I know we haven't found a cure for cancer yet, but it's surely not from a lack of funding. Also, we have to keep the smoking rate in mind. 11.9% of California's adults currently smoke. Not only is that below the OECD average of 22.1%, but is also below the national average of 19.3%. It would be great if the percentage of smokers were near 0% and if we found a cure for cancer. However, such noble goals need to temporarily take a back seat to more important things, such as California's financial situation.        

5) California's fiscal burden. With recent tax data, California's state tax burden ranks amongst the highest in the nation (6th highest in 2009). Looking at the economic freedom rating created by the Mercatus Center, California ranks 46th in economic freedom. To top it all off, California is dealing with a huge debt issue, which has been compared to Greece more than once. Simply put, cancer research is not high on California's priority list. So, rather than funding cancer research, which is already well-funded by the federal government, why not focus on debt reduction instead, especially when there are talks to do things like cut public salaries by five percent?

6) Inefficiencies and Unintended Consequences. The bill sounds great on paper. "If we increase the tax on cigarettes, not only do we stop the filthy habit, but we can also fund cancer research." Much like with just about anything else the government does, it is not as great as it sounds. The first is the assumption that the tax will bring in as much revenue as proponents would like. A similar tax was enacted in Maryland a few years back, and they only collected fifty cents for every dollar. This shouldn't be a surprise because taxes create deadweight loss (although I was surprised to say that the legislative analyst took the deadweight loss into account [p. 16]). Even in New Jersey and Washington DC, there was decrease in cigarette tax revenues after enacting the tax. It would be nice to dismiss these examples as anomalies, but the problem with that is unless you are dealing with an exceptionally inelastic good, you won't collect all the revenue you would expect. Also, consider the fact that the rate of smoking is decreasing without the tax increase (See Point 4). Expected revenue is only going to diminish over time.  

Second, only sixty percent of the funds would actually go to cancer research (§30130.53(1)). I'm also not a big fan of §30130.53(2) that allows buildings to be build at the committee's discretion. There is just something about "the middleman" that makes me feel uncomfortable. It is not simply because of the excessive amount of $127.5 million would be allocated towards buildings. It is also the matter of the fact that when California passed Proposition 10 to hike the cigarette tax back in 1998, it was met with misappropriation of funds and overall scandal (see California government report here). Since history has a way of repeating itself, you can't help but think that the remaining forty percent is going to get caught up in administration, oversight costs, and possibly corruption.

Even if the money is spent efficiently, there is still the matter of creating a black market. Although black markets are more prevalent with downright prohibition, higher sin taxes still can create a black market. Either people buy smuggled goods or they the cheap roll-your-own cigarettes that are unhealthier because they lack filters. The Cato Institute did a study on New York's black market in cigarettes back in 2003, and as if it were a surprise, it's still a problem. The same goes for Spain and the United Kingdom. The underground market is just another way for smokers to get a hold of cigarettes, as well as a way to increase crime rates.

Conclusion: I don't care if the American Cancer Society or the California PTA support Prop 29, and I'm not going to be swayed by a one-liner like "The choice is simple." I would say the choice is complicated by politics, and the voting results will reflect that. If it weren't for that, I would say the choice is very simple: a sin tax on cigarettes is a bad policy, and the citizens of California should vote against Prop 29. It might sound great to pass a bill that will save lives and beat Big Tobacco. What you get in reality is different. The tax is an infringement of freedom that would disproportionately affect poor people while leaving open the real potential for a black market. The tax revenue would probably not be as much as expected, and even the money saved on health care costs cannot be determined. All of this would be enacted by a government that not only lacks fiscal discipline, but has been troubled with past scandal of the allocation of cigarette tax revenues. I hope that California can repeat its history when it voted against a similar proposition back in 2006.


7-5-2015 Addendum: A working paper was just released showing little evidence of a negative relation between cigarette taxes and youth smoking.