Tag: Tax Foundation

Opinion: Hopes for Transforming the FDA
Writing for the Tax Foundation, Adam Hoffer published “Opportunities to Reform the Food and Drug Administration’s Center for Tobacco Products,” where he discussed the lingering challenges plaguing the CTP and suggested a pathway forward.

“The CTP has come under heavy criticism in recent years, which we have covered extensively due to the surge in illicit market activity and the resulting challenges of implementing tax policy on alternative tobacco products (ATPs),” Hoffer wrote. “In 2022, the FDA requested the Reagan Udall Foundation conduct an independent investigation of the CTP. The resulting report highlighted several shortcomings, including a lack of a clear regulatory and product approval framework, an inefficient and slow product review process, a lack of transparency and communication, and broad struggles with the vaping market. We have identified four broad categories for CTP reform with direct policy actions to achieve each goal.”

The suggestions were:

1. Enhance Transparency and Accountability
- CTP Should Publish a Rubric that Includes Requirements for Product Approval
2. Streamline the Premarket Tobacco Product Application (PMTA) Process
- CTP Should Create a Fast-Track PMTA Approval Pathway for Reduced-Risk Products
- Default Marketing Authorization Approval Should Occur After 180 Days
3. Fix the US Vaping Market
- CTP Should Authorize More Legal Vaping Products
- CTP Should Strengthen Enforcement Against Illegal Products
4. Address Blind Spots – The Teen Vaping Crisis That Isn’t

Dr. Adam Hoffer is the director of excise tax policy at the Tax Foundation. He earned his doctorate in economics from West Virginia University and his undergraduate degree from Washington & Jefferson College.
April 17, 2025
Opinion: Washington Flavor Laws ‘Kicking the Can Down the Road’

This week, after previous renditions seemed dead in the water, Washington legislators slipped twin bills into the House and Senate that would impose a statewide flavor ban on tobacco products and add a carbon tax on cigarettes. In an opinion piece for the Tax Foundation, Adam Hoffer and Jacob Macumber-Rosin, both experts in tax policy, compared these schemes to others around the country.

“A carbon tax on cigarettes is novel, while the idea for a flavor ban is not,” they wrote. “Massachusetts and California have already banned flavored tobacco products in their states, and the experiences have been so negative that the Biden administration backed off its own plan for a nationwide flavor ban.

“Both Massachusetts and California experienced massive tax revenue declines, incredible growth in illicit market activity, and little to no change in smoking rates. Following its flavor ban in 2020, Massachusetts saw cigarette excise tax revenue decline by more than $100 million and revenue has persisted at the lower level. Unfortunately, fewer legal sales don’t necessarily translate to less consumption. Our previous work identified that about 90% of the reduction in sales in Massachusetts was offset by increases in legal sales in neighboring states. Illicit product seizures and smuggling estimates have skyrocketed.”

The writers said California fared no better, losing more than $230 million in state cigarette sales and excise taxes since it banned flavors in December 2022. Unlike Massachusetts, however, smokers didn’t turn to neighboring states, they began utilizing illicit and international markets to replace their legal purchases.

“One study collected details on 15,000 discarded cigarette packs from public trash containers across 10 major California cities in May and June of 2023,” they wrote. “These data showed that 21.1% of the discarded packs were menthol-style cigarettes, a mere 3% drop in menthol market share estimates from before the flavor ban.

“The same data found foreign and illicit market share spiked. Non-US packs comprised 27.6% of the sample, compared to an estimated foreign market share of only 17% previously.”

The state’s fiscal analysis predicts a flavor ban would decrease revenues by more than $100 million per year, and the proposed carbon tax would only recoup 1% of that.

“The justification for applying a carbon tax on top of existing cigarette taxes is weak,” they wrote. “Secondhand smoke certainly harms others nearby who are forced to inhale it, and cigarette smoking releases carbon dioxide, but classifying cigarettes as a broad state-wide pollutant is a stretch.

“These haphazard policies appear to be part of a ‘try-anything’ effort to close the state’s projected $15 billion budget shortfall. Washington State taxpayers deserve sound fiscal policy reforms that will provide stable, long-run revenue for the government. Narrow-based and patchwork fixes only kick the can down the road to the next set of elected officials.”

April 9, 2025
Excessive Tax Rates Boost Illicit Markets

Photo: Tobacco Reporter archive

Excessive tax rates on cigarettes induce substantial black and gray market movement of tobacco products into high-tax U.S. states from low-tax states or foreign sources, according to a new report by the Tax Foundation.
New York has the highest inbound smuggling activity, with an estimated 53.5 percent of cigarettes consumed in the state deriving from smuggled sources in 2020. New York is followed by California (44.8 percent), New Mexico (45.5 percent), Washington (41.5 percent), and Minnesota (34.8 percent).
New Hampshire has the highest level of net outbound smuggling at 52.4 percent of consumption, likely due to its relatively low tax rates and proximity to high-tax states in the northeastern United States. Following New Hampshire is Indiana (35.6 percent), Virginia (27.6 percent), Idaho (25.8 percent), Wyoming (24.4 percent), and North Dakota (18.6 percent).
Illinois and New Mexico significantly increased their cigarette tax rate from 2019 to 2020. Both states saw major increases in cigarette smuggling.
“Policymakers interested in increasing tax rates should recognize the unintended consequences of high taxation rates,” the Tax Foundation wrote on its web site. “Criminal distribution networks are well-established and illicit trade will grow as tax rates rise.”
The authors stress that excessive taxation is not the only driver of illicit trade. Measures such as flavor bans and reduced-nicotine mandates, they argue, also have the potential to push tobacco sales into the illegal sphere.

December 7, 2022
Flavor Ban Pushes Sales Next Door

Photo: Borgwaldt Flavor

Massachusetts’ ban of flavored tobacco products is not the success its proponents make it out to be, according to Ulrik Boesen of the Tax Foundation.
While a study published in JAMA Internal Medicine found that the sale of flavored tobacco in Massachusetts decreased more than in 27 control states in the wake of the state ban, the authors failed to consider the impact of cross-border trade.
According to Boesen, increased sales in neighboring New Hampshire and Rhode Island almost completely made up for the decrease in Massachusetts.
“The end result of the ban, in fact, is that Massachusetts is stuck with the societal costs associated with consumption, while the revenue from taxing flavored tobacco products is being raised in neighboring states,” Boesen wrote on the Tax Foundation’s website.
Looking at the New England region as a whole confirms that the flavor ban did not work as intended, according to Boesen. “Sales moved around rather than disappeared, and the ban evidently did not impact consumption,” he wrote. “Total sales for the region decreased by slightly more than 1 percent comparing the 12 months preceding the ban to the 12 months following the ban—largely comparable to the national sales trends.”
As the U.S. Food and Drug Administration and other states consider Massachusetts’ example, Boesen urges lawmakers to think twice before banning flavored tobacco products. “The experience out of Massachusetts has not been a success story and other states should be wary of conducting their own expensive experiments,” he wrote.

February 4, 2022