In the long US public-health war against tobacco, the current battleground is menthol cigarettes. The Family Smoking Prevention and Tobacco Control Act of 2009, which gives the Food and Drug Administration authority to regulate such products, outlaws other flavor and chemical additives. Citing evidence that menthol cigarettes—which have been marketed to the Black community and now represent a third of the cigarette market—are more addictive and a greater threat to health than plain smokes, more than 150 cities and counties and a few states have since banned their sale too. The FDA proposed this year to do likewise.
The problem with local or even statewide restrictions on a product is that in many cases Americans can just drive to the next state to get what they want. And that’s what happened with the first state ban on menthol cigarettes, in Massachusetts starting in June 2020, according to research by the University of Washington’s Ali Goli and Simha Mummalaneni and Chicago Booth’s Pradeep K. Chintagunta.
“Many Massachusetts residents are still smoking menthols; they’re just buying them from a different state,” says Mummalameni. “If you think that stopping people from smoking menthol cigarettes is beneficial from a public-health perspective, this ban has only been about 50 percent successful. It has also dramatically reduced the state’s tax revenue, and that’s a rough combination for Massachusetts.”
The researchers analyzed cigarette sales in Massachusetts and neighboring states before and after the menthol ban. They find that while some smokers switched to nonmenthol cigarettes, overall tobacco consumption didn’t change much. Menthol purchases in contiguous states rose, depriving the state of an estimated $108 million in tax revenue. The state would have been better off simply adding a $6-a-pack menthol tax, which the researchers calculate would have cut menthol sales 28 percent while raising tax receipts $72 million, or 14 percent. They arrived at this figure through modeling, trying to strike a balance between raising revenue and lowering the smoking rate.
In lieu of a national prohibition, the takeaway for local policy makers and regulators is to tax rather than ban. “A menthol tax would allow them to directly reduce menthol consumption while also generating a large amount of additional tax revenue that could be used to fund other anti-smoking and public health outreach efforts,” the researchers suggest. Of course, a menthol ban by the FDA would take away the cross-border shopping option—and ultimately lead to better health outcomes.
Goli, Mummalaneni, and Chintagunta studied NielsenIQ Retail Scanner Data, part of the NielsenIQ databases housed at Chicago Booth’s Kilts Center for Marketing. Tapping into data from 2019 and 2020, the researchers examined what happened to sales in Massachusetts and 30 miles into New York, Vermont, Connecticut, Maine, Rhode Island, and New Hampshire. They find that about 45 percent of Massachusetts’s menthol cigarette purchases moved to neighboring states after the ban—as well as about 7 percent of nonmenthol sales.
Some Massachusetts smokers switched from menthol to nonmenthol, contributing to a 10 percent increase in nonmenthol sales in the state. Overall cigarette sales within Massachusetts dropped about 21 percent after the ban, and cigarette consumption in the state declined by almost 5 percent, they estimate.
The shifts partly reflected Massachusetts’s already higher prices and taxes on cigarettes than in neighboring states. It’s also a small state, making it easy for people to cross the state line to pick up a pack or a carton. The findings are in line with other research indicating that when governments implement bans or raise taxes, consumers engage in cross-border shopping to continue buying the same products.
Goli, Mummalaneni, and Chintagunta also modeled what the effects would be in Massachusetts if there were a national ban on menthols. Their findings predict that a prohibition would have “substantially better outcomes,” assuming that vast numbers of smokers wouldn’t be able to illegally smuggle in menthols from Mexico or Canada. They estimate that nonmenthol sales in Massachusetts would increase by about 30 percent under a national ban, and overall cigarette consumption in the state would drop by about 7 percent.
Until then, a statewide menthol tax is a better solution than a ban, the researchers argue. “The bottom line is that a ban is not the only instrument that policy makers have to reduce cigarette consumption,” Goli says.
Ali Goli, Simha Mummalaneni, and Pradeep K. Chintagunta, “Making a Smooth Exit? Menthol Bans and Cigarette Sales in Massachusetts,” Working paper, July 2022.
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