Cigarette Tax Hike Sparks Panic Buying

This article is very informative toward the purpose of increasing excise taxes. I believe that Joey Connor did an excellent job at pointing out the effects of the tax increase on tobacco products. He provided information on previous tax rates, so readers can have a clear idea of the increase percentage of taxes. He also supported his arguments by incorporating other sources in his article. For instance, he incorporated the analysis done by the National Public Radio on how the increase in price of cigarettes will affect the consumer behavior.

History has proven that government penalties, in the form of taxes, deter smoking. The 2000 U.S. Surgeon General’s Report, Reducing Tobacco Use, found that raising tobacco-product prices decreases the prevalence of tobacco use, and tobacco tax increases produce significant long-term improvements in health. From its review of existing research, the report concluded that raising tobacco taxes is one of the most effective tobacco prevention and control strategies (7). Along with price increases, mass-media campaigns and smoking bans have made cigarette smoking pretty much unacceptable in today’s society. “Today, approximately 22 percent of adults age twenty-two and older are smokers, compared with 33 percent in 1979” (Thorpe 1440). It is clear, from these examples, the use of penalties to deter the unhealthy behavior of smoking is a successful intervention.

This paper will define terms such as economics, micro economics, the law of supply, the law of demand and the factors which lead to a change in supply and demand. This paper will also summarize the article and

The purpose of this economics report is to illustrate the economic concerns and arguments around smoking in Australia and the methods of taxing aimed at reducing the smoking rate. The report will use a variety of research articles, economic theories and models to report on this issue so that the CEO of the Cancer Council of Australia has a thorough understanding.

Health is widely diversified in the United States because of the best resources available by the health care systems in hospitals. New inventions are being developed every day, and billions of dollars have been spent to increase the level of health care while lowering the cost of insurance so hospitals can offer the best treatment. Meanwhile, there are people in our society who are excessive smokers and drinkers, and these limitless behaviors have an effect on the cost of insurance and hospital services. The taxes received from products such as cigarettes and alcohol are referred to as ‘Sin taxes’ -- due to the harmful effects that these products have on your health, and due to the increased medical cost for government. Smoking has been the leading cause of high risk problems such as heart attack and lung cancer, and people still continue these unhealthy habits which can lead to hospitalization and even death. The consumer of these products should feel the pinch of paying high ‘sin taxes’. Therefore, the government should increase taxes on alcohol and tobacco to help pay for the rising cost of medical expenses.

This media report outlines the publics impulsive buying of cigarettes upon the government’s mention of the very rapid increase in taxes, thus resulting in an

Department of Health and Human Services, 2013). That is only 7.9 percent away from reducing a quarter of cigarette consumption nationally! This is one of the most significant achievements for the HHS. A strategy on how to reduce cigarette consumption was not that hard for officials to figure out, it was quite simple. What did they do? They increased the taxes on cancer sticks. Studies showed that each time the federal government increased the price of cigarettes by ten percent, consumption of the product was reduced by at least three percent (Boonn,

Economic analysis of the effects of tax policy on cigarettes is motivated by the desire to understand how economic forces influences tobacco consumption. This essay will demonstrate how tax policy is a well recognised and supported method of reducing tobacco consumption and will show how tax policy is used to influence supply and demand of tobacco products. The tax on cigarettes in Australia, often called excise, is imposed on cigarette manufacturers. The excise is then passed on to consumers with the effect being a higher price and lower demand.

The statistics show everything needed for financial and personal benefits from the ban of cigarettes, “Tobacco taxes are a proven strategy to reduce smoking, particularly among teenagers and low-income people. Given the high health costs of tobacco use, reducing smoking rates would lead to substantial health gains,” (Marr 1). By raising higher taxes on cigarettes, it raises revenue, lowers the amount of people buying them while lowering the health care taxes for those who need medical care as an effect of smoking. There are clear financial and health positive changes that could be made by banning the market of cigarette sales. Hundreds of years have gone by and thousands of people are suffering an addiction that can be easily controlled, just beginning with taxes on cigarettes, “ Extensive research shows that tobacco taxes reduce smoking and extend lives,” (Marr 1). Since smoking begins at a young age, with the taxes, that will hopefully lead up to a complete ban, will make young adults unable to sustain the lifestyle to buy cigarettes. The taxes will make it difficult for adults with low incomes to spend money on something that is unhealthy for them anyways. There is the point that the taxes would take a greater amount on lower income households but that may not be the case, “They point out that low-income people have higher smoking rates: 29 percent of poor adults smoke, compared to 18 percent of non-poor adults. Also, expenditures for cigarettes account for a greater share of lower-income households’ budgets,” (Marr 1). If tobacco only harmed the smokers the taxes might not have the amount of impact it is striving for, but is used to reduce tobacco use. It may also be used to raise revenue for our country which is an added bonus. To smokers and non-smokers, it brings on numerous health risks and higher

The impact of the tax is an increase in the cost of every pack of cigarette a consumer buys. Since smokers view cigarettes as necessities as their addiction to nicotine worsens, the demand curve is relatively steep. When demand curves are steep, the consumer is burdened with paying most of the tax. Therefore, the price of cigarettes will rise greatly if the excise tax is passed. The party that cannot respond to the change are the ones that pay the tax. There are no substitutes for cigarettes, especially considering that this tax includes all forms tobacco and electronic cigarettes. Part of the reason this tax is on the ballot is to increase revenue, and the increase in revenue will be used “to replace old revenue lost due to lower tobacco consumption

Thomas provides an evidence in regard to tobacco use. He states, New York City made reducing smoking a top priority, increasing the tobacco tax in 2002 and making virtually all workplaces smoke free in 2003. Tobacco use declined rapidly in 2003 and 2004, but the decline then stalled, a development that would not have been known if New York City had not begun conducting large community surveys on an annual basis beginning in 2002. In thinking of this evidence, there should be more implementations such as these to prevent the public from the use tobacco. Since this works I t would a great to increase the tax on tobacco. The government should really take in the over this since the people do really care about the health I just that it necessary for someone people to be treated as kids. I just that it is even worse than in the case of children these people know that the use of tobacco is wrong, but they go head and use it. It is just frustrating and angry some to see people waste their health to something not worth of wasting for. It is just my belief the government not only to increase taxes on tobacco but also ban it. In a sense I viewed tobacco as bioterrorism to the public. Not only to the consumer, but also the public in general because this is causing the second hand smoker people to get sick. Then again, it is all profit and whatever that makes the most profit to the economy and one going chain. The sellers are gaining their profit and the health care as well and only person at the damaging is the

The above graph shows that at the original price level(P), the marginal private benefit(MPB) of cigarette is greater than the marginal social cost (MSC). This means that cigarette is over-consumed and the green triangle between MSB and MPB shows the welfare loss. The government may decide to increase the indirect tax to cigarette as the cost of cigarette(healthcare) outstrip the taxation it collects. The supply curve shifts to the left from S=MPC=MSC to S+tax. The quantity consumed will decreases from Q to Q1 and the problem of over-consumed will be solved as the yellow triangle that represents the decrease in consumption is equal to the original welfare loss triangle.

Cigarette smoking and tobacco usage is a negative externality of consumption, an economic activity that imposes costs on a third party for which the consumer doesn’t account for the costs. In this case, those who are passive smoking, diseases and health issues are the costs towards them. Negative externalities are one of the sources of market failure, a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium. Negative externalities occur due to the overprovision of demerit goods, a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves. They are over-consumed and over-produced.

There are many cities who have implemented bans on cigarettes, but China overall is still the leading consumer of cigarettes in the world. A countrywide tax on cigarettes has been proposed to their Ministry of Finance, and Ministry of Economics and Trade, but a decision has yet to be made. Tobacco production provides substantial revenue to the government and a tax increase will have a significant effect on the central government and reduction of consumption of cigarettes. According to a study done by the group proposing the tax, “a 25% tax increase will have an overall monetary benefit that far exceeds the negative impact on the cigarette industry and tobacco farmers. In financial terms alone, not counting the number of lives saved and medical care cost savings, the gain of the central government tax revenue (24.58 billion Yuan) twice exceeds the loss of tobacco farmers’ earnings, tobacco industry workers’ earning and loss of industry and local government revenue (11.74 billion Yuan)” (Hu TW 107). There many components to this calculation, but some factors included the reduction of cigarette consumption, the number of lives saved, savings in medical care costs, gains in productivity due to avoidance of premature death, industry revenue lost, lost jobs in cigarette industry, loss of tobacco income, and loss of local government

The government’s responsibility to the costs of treating tobacco influenced illness have been argued as moot because the patients who would choose to smoke would shuffle off of this mortal coil before their disease became a cost that would outpace the taxes collected from tobacco sales.