The Incidence of the Elimination of State Sales Taxes on Feminine Hygiene Products

• In Event: Sales Taxes as Social Policy: Incidence, consumer responses and benefits distribution of wax waivers and inclusions

Abstract

As of May 2024, twenty states imposed sales tax on feminine hygiene products, with an average tax rate of 8.1% during our study period. This paper investigates the impact of sales tax on feminine hygiene product sales across multiple states in the U.S. We first utilized Nielsen Retail Scanner data from 2015 to 2020, employing a stacked difference-in-differences design to assess the effects of removing these taxes on sales quantities and tax-exclusive prices. Our findings indicate an estimated zero effect, with both the tax elasticity of demand (-0.086) and the tax elasticity of price (-0.012) being almost zero. Next, we used the Nielsen Consumer Panel Survey to identify products consumed by specific demographic groups. Our analysis revealed that products used by high-income households exhibit a higher tax elasticity of both demand and price compared to those consumed by low-income households. However, we did not find sufficient evidence to demonstrate that the removal of the sales tax statistically significantly affects demand and price between different product groups. These results imply that the tax benefit is passed through to consumers. However, by calculating the tax savings per female and a female poverty-targeted cash transfer of equivalent revenue cost, we find that means-tested cash transfer to low-income females of menstruation age would deliver 10-15 times more benefit per recipient at an equivalent fiscal cost to the state.

Authors

• Shuangyu Chen, Indiana University
  Presenting Author

• Ziyue Xu, Boston University
  Non-Presenting Co-Author

• Justin Ross, Indiana University
  Non-Presenting Co-Author

• Lanjun Peng, Arizona State University
  Non-Presenting Co-Author