Taxation at the Edges of Morality: A Statewide Experiment on Tobacco Enforcement in California

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Governments worldwide use excise taxes to discourage consumption of harmful goods like tobacco and alcohol, yet vice tax evasion remains stubbornly high even in high-capacity states. Gerez will argue vice taxes are distinct because they lack intrinsic compliance mechanisms. Under these conditions, deterrence becomes the primary enforcement tool, but high detection capacity may be undermined by weak punishment capacity and the attractiveness of gray markets. Gerez will test this framework with two complementary approaches. First, Gerez will implement the first randomized controlled trial of excise tax enforcement in collaboration with the California Department of Tax and Fee Administration. The design randomizes tobacco inspections for retailers (n $\approx$ 600) to estimate the causal effects of inspections and fines on subsequent noncompliance. Second, Gerez will invite to a survey all licensed California tobacco retailers to assess attitudinal drivers of compliance and experimentally test how information about enforcement, penalties, public goods, and social norms shapes compliance perceptions and intentions.

As an additional note, Gerez and co-researcher Simone Paci, Stanford University, are currently in the baseline wave of the RCT, with endline inspections scheduled for later this summer. While baseline data collection is complete, the team would especially welcome feedback on the analysis plan before endline data collection and, in particular, on the planned survey, which will be fielded a few months after the endline wave.

Julian Gerez, Department of Criminology, Law, and Society, UC Irvine, will present research performed in collaboration with Simone Paci of Stanford University.

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