by Matt Rosenberg August 16th, 2010
OVERVIEW: In November 2005, Washington State voters approved Initiative 901, to ban smoking in all public locations and places of employment. In the lead-up to the vote on the ballot measure, one argument advanced by opponents was that if approved, the ban would have negative effects on taxable retail sales (TRS) volume at bars and taverns. But after the law took hold in December 2005, the opposite effect was reported for 2006 and 2007, in a new study published in a journal of the Centers For Disease Control. The author was a public health researcher for the state of Oregon and Multnomah County, Oregon, and used Washington State Department of Revenue quarterly TRS data for bars and taverns from 2002 through 2007, and other controlling data, to develop a statistical model to assess the economic effect of I-901’s passage. The study finds that sales activity became significantly higher than it otherwise would have been, in Washington state bars and taverns following voter approval of the smoking ban.
KEY DOCUMENT: “Smoke-Free Law Associated With Higher-Than-Expected Taxable Retail Sales For Bars And Taverns In Washington State,” Preventing Chronic Disease, U.S. Centers For Disease Control, 7/10.
- Controlling for seasonality, unemployment, inflation, and changes in population and personal income, the study found that “taxable retail sales (in Washington state bars and taverns) grew significantly through the fourth quarter of 2007. Our analysis suggests that the statewide smoke-free law was associated with higher revenues than would have been expected had the smoke-free law not been in effect.”
- By the fourth quarter of 2007, total retail sales in Washington state bars and taverns was “35 percent higher with the smoke-free law than it was projected to be without it.”
- Washington state experienced a net gain of more than $105 million in total retail sales (at bars and taverns) during the two years after implementation of I-901, versus what would have been expected without the ban, based on historical and other data factored into the statistical model. At a 6.5 percent sales tax rate and a 0.5 percent business and occupation tax rate on taxable retail sales at bars and taverns, that translates to a benefit of approximately $7.4 million to the state’s general fund.
- “Revenue gains may be an affect both of new nonsmoking patrons going to bars and existing smoking…patrons continuing to go to bars….Surveys of dining and drinking behavior indicate that few smokers will change their behavior, while nonsmokers are more likely to patronize the newly smoke-free venues.”
- The number of bars and taverns in Washington state increased from 1,020 in the first quarter of 2006 to 1,117 in the fourth quarter of 2007. While a portion of the increase in taxable retail sales at bars and taverns could be attributable to more venues, “the expansion is an indicator of a thriving sector of the economy that was not hurt by the smoke-free law.”
NOTES ON THE STUDY: The study was funded by the Washington State Tobacco Prevention and Control Program. The author was Myde Boles, PhD, Program Design and Evaluation Services, Multnomah County Health Department and Oregon Public Health Division, Portland, OR. The study was done with assistance from Multnomah County Health Department and Oregon Public Health Division, the Washington State Department of Health, and the Washington State Department of Revenue. The study was peer-reviewed before publication in the CDC journal, Preventing Chronic Disease.