In a survey released this morning by Scioto Analysis, 15 of 17 economists agreed that increasing taxes on cannabis, gambling, and tobacco will help reduce the negative externalities associated with those markets. In his most recent executive budget recommendations, Governor DeWine has expressed his support for increasing taxes on these goods in order to help fund a child tax credit.
Will Georgic from Ohio Wesleyan wrote in his comment: “The only consideration that keeps me from "strongly agreeing" with this statement is if the taxes are high enough to push this type of consumption into unregulated markets. We will certainly see a reduction in legal cannabis consumption, legal gambling, and tobacco consumption relative to what would be observed without the tax increase. The only question is whether consumers will break the law to avoid these taxes.”
The economists who disagreed with this statement questioned whether or not increasing taxes would actually change consumer behavior. As Kay Strong wrote: “These products have low price elasticity of demand. Raising their "price" will have a small effect on reducing demand but a large revenue return for government.”
Economists were more split on the distributional impacts of this policy. When asked about the statement “Increasing taxes on cannabis, gambling, and tobacco will disproportionately harm low-income households,” nine economsists agreed, six disagreed, and two were uncertain.
One justification economists who disagreed offered was the potential health savings associated with reduced consumptions of these goods. Michael Jones from the University of Cincinnati wrote “Increasing taxes on cannabis and tobacco will reduce the overall usage of these products among low-income households. Individuals who eliminate tobacco use see significantly better health outcomes and quality of life.”
Economists who agreed with this statement pointed to the fact that sales taxes are regressive, and often disproportionately impact the budgets of low-income households.
The Ohio Economic Experts Panel is a panel of over 30 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here.