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Comments on Tobacco Product
Standard for Menthol in Cigarettes
The Tax Foundation respectfully submits comment on the state tax and revenue
implications of the proposed tobacco product standard for menthol in cigarettes.
Alongside the intended consequence of limiting sales of menthol cigarettes,
menthol cigarette prohibition will have a significant impact on state revenue
collections, in excess of the losses associated with individuals who respond in
keeping with desired policy outcomes (e.g., giving up or never beginning smoking).
Given the high level of taxation on tobacco products—on average, excise taxes
alone make up 40 percent of the retail price—a menthol prohibition will assuredly
reduce revenues both for federal and state governments, while it is less likely that
the policy will yield significant benefits in terms of smoking cessation.
If the Food and Drug Administration bans menthol cigarettes, federal and state
governments, combined, stand to lose more than $6.6 billion in the first full year
following prohibition.
Prohibiting flavors in combustible tobacco products is not without precedent.
Multiple international jurisdictions have already banned the sale of non-tobacco
flavored cigarettes—among them the European Union and Canada. In the U.S.,
several localities have banned the sale as well, as have Massachusetts and the
District of Columbia. The major difference between the U.S. and most other
tobacco markets is the non-tobacco flavored cigarette market share. Both in Canada
and Europe, non-tobacco flavors made up less than 10 percent of the market, so
the bans impacted a relatively minor consumer group. In the U.S., menthol flavored
cigarettes make up more than one-third of the total market, and are particularly
popular with African-American smokers, 75 percent of which consume non-tobacco
flavored products.
It stands to reason that if consumption truly disappeared as a result of pro