Abstract
AbstractThis study explores the effects tobacco special interest has had on cigarette tax rates. Using a spatial econometric model to control for tax competition and the endogeneity present in state tax rates, this study finds that tobacco special interest has played a significant role in influencing state cigarette tax rates. Pounds of tobacco grown in a state and tobacco industry campaign contributions are associated with lower cigarette tax rates. The empirical results show that the magnitude of the special‐interest effect can be two to five times as large when the spatial spillover effects are included. (JEL C23, H71, H73)
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