THE COMPENSATING BEHAVIOR OF SMOKERS - TAXES, TAR, AND NICOTINE

Using data from the 1979 and 1987 National Health Interview Survey (NH IS), we test whether smokers alter their smoking habits in the face of higher taxes. Smokers in high-tax states are more likely to smoke cig arettes higher in tar and nicotine. Although tares reduce the number o f cigarettes consumed per day among remaining smokers, total daily tar and nicotine intake is unaffected. Young smokers, aged 18-24, are muc h more responsive to changes in taxes than are older smokers, and thei r total daily tar and nicotine intake actually increases after a tax h ike. We illustrate that tax-induced compensating behavior may eliminat e some health benefits generated by reduced smoking participation. A m ore appropriate tax might be based on the tar and nicotine content of cigarettes.