The Federal Drug Administration’s (FDA) new tobacco product standard would prohibit menthol in cigarettes and all flavors in cigars in an attempt to improve public health outcomes and decrease tobacco consumption. However, this policy is shortsighted — not only will it yield a very limited decline in usage, it will have a crushing impact on the middle class and eliminate hundreds of millions of dollars in revenue for states.
The proposed rule would prohibit the use of menthol as a characterizing flavor in cigarettes and cigarette components, including those that are sold separately to consumers. Specifically, the rule would prevent cigarettes or any of their components or parts (including the tobacco, filter, wrapper, or paper) from containing, as a constituent or additive, menthol that is a characterizing flavor of the tobacco product or tobacco smoke. Under the proposed rule, no person may manufacture, distribute, sell, or offer for distribution or sale, within the United States a cigarette or cigarette component or part that is not in compliance with this product standard.
According to the FDA’s estimate, this rule will cost $307 million annually over the next 40 years in compliance costs for firms, to consumers impacted by the rule, and for the government to enforce this product standard. The actual total costs would be considerably higher as the previous figure does not include loss of tax revenue or the devastating impact to the job market. In a similar example, Massachusetts banned menthol and other flavored cigarettes in 2020, which resulted in a total excise tax revenue loss of $127 million in just the first year following the ban. According to Statist a ban on menthol cigarette sales would ban 37% of national cigarette volume. Nationwide, this represents $6.6 billion in government revenue at risk each year.
Although many states are flush with cash right now due to the massive COVID-19 spending packages moved through Congress in the last two years, that money won't last forever. By removing menthol cigarettes from the legal market, the Biden administration is also removing hundreds of millions of dollars in tax revenue in perpetuity — a fiscally irresponsible decision at a time when many leading economists are predicting a recession in the next 12 to 24 months.
By prohibiting the production, transportation, and sale of menthol cigarettes the Biden administration will also be eliminating untold jobs from the market, a blow to the middle class workers who depend on these production and transportation jobs. According to IBISWorld, there are at least 9,813 tobacco manufacturing jobs in the US as of 2022 not to mention retail and the countless other jobs up and down the supply and distribution chain.
In all likelihood, a ban on menthol cigarettes nationwide would have the inverse effect the FDA is trying to accomplish. Just as we saw with the Massachusetts ban, transport and sales of flavored cigarettes were pushed into the black market, making them more accessible to youth and first time smokers. If a nationwide ban moves forward, youths across the country will likely be able to readily find and purchase menthol cigarettes for sale by unregulated illegal actors.
The administration should abandon this proposed rule and instead focus its efforts on proven harm reduction strategies such as youth education, cessation support, and underage prevention. By keeping menthol cigarettes in the legal regulated market with these reduction strategies in place, the FDA can achieve its goal of improving public health outcomes. Further, doing so would allow the FDA to help prevent the creation of a black market. Continuing to pursue this misguided rule would be bad news for consumers and taxpayers.