We used price per pack of cigarettes as a primary independent variable, as most of the variance in price within states over time is due to taxation (R-squared 0.98). Annual state cigarette price per pack data were adjusted for inflation to reflect 2012 dollars using the consumer price index obtained from the Bureau of Labor Statistics. We adjusted the state price per pack to account for local cigarette taxes. For each state and year, we calculated the ratio of gross state cigarette tax revenue, including local collections, to gross revenue due to state taxes alone. We multiplied this ratio by the state tax to arrive at the adjusted tax. Finally, we subtracted the unadjusted tax from the price per pack and replaced it with the adjusted cigarette tax. All price per pack, tax, and tax revenue data were obtained from “The Tax Burden on Tobacco” historical compilation (Orzechowski & Walker, 2011).
