Tax On Smoking Essay

"Use of e-cigarettes has grown quickly in the last decade, with U.S. sales expected to reach $4.1 billion in 2016." Electronic cigarettes are substitutes to cigarettes. As the price of one good increases, the quantity demanded of that good, and thus the quantity demanded of the substitute good would increase. This is evident on the graph below. As the tax causes a price increase from P1 to P2,the quantity demanded of e-cigarettes also increases from Q1 to Q2. Cigarettes and e-cigarettes would therefore have a positive cross-price elasticity of demand which would be small in the short term but large in the long term. It is extremely difficult for people to switch any addictive habit. However, over the long term, citizens would have time to adapt and switch to electronic

even though the author of this article talks in particular about excise taxes, this initiative will eventually affect the buyer because they will have to pay more for the this products they are consuming. In class, we have a discussion on sales taxes and the incidence of tax. Even though cigarette distributers are required by law to pay this tax, the consumers of cigarettes are going to end up paying more for the increase of taxes. Therefore, this article is also related to the legal and economic incidence of a

We have all been there in line waiting to purchase something from the store; we step up for our turn take out money that we believe should be enough only to find out that we forgot to count in the taxes and now have to dig into our purse, wallet or pocket to find the extra change, or in some cases dollars. There is a joke that there are a few things we are guaranteed in life, taxes and death. While it may be a joke it holds a fair amount of truth, depending on where you live. Taxes are everywhere “invisible” or obvious taxes, but lets focus more closely on the taxes involving cigarettes. To me as a non smoker it makes sense and I am for it, taxes help the governments budget and other areas. However one must begin to wondered the effects taxes on one of the biggest markets in the United States have, for those who do smoke and those who enjoy an, excuse my banter, but live shaver.

Government passed a law making cigarettes illegal would have numerous results. First, making cigarettes illegal means people will smoke les cigarettes. Therefore, smoking people can be healthier, leading to a longer life span. Second, illegalize smoking would also causing black markets. Because cigarette is addictive, people who smoke would do anything to get cigarettes, black market would cause crime rate to rise. Third, government will receive no taxes from cigarette industry due to the illegalizing of it. This will cause the government get less money can provide poor service. Forth, because of the illegalization, tobacco farmers will lose their jobs. Furthermore, there would be idle

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 price of tobacco is planned to rise again this year with a planned increase of 12.5% on excise duty from 2017 until 2020. The expected increase has roused those who smoke as Australians already pay a substantial amount for the product compared with other countries and this has resulted in black market trade. The reason for the increase in excise duty is due to the negative externalities caused by the product to both the consumer and third parties. With regard to taxes and information campaigns the following analysis will determine the outcome these policies have had on the tobacco market.

The effectiveness of tobacco tax policy solely lies on the pricing strategy implemented by tobacco companies that is, tobacco companies can decide to take up the tax increase to ensure that it does not affect consumers as an increased price, therefore subverting the the effectiveness of the tobacco tax policy (a method referred to as ‘undershifting’); passing it onto cosumers in full; or rather increasing prices on top of the tax increase (a method referred to as ‘overshifting’ that thereby increases both the effect of the tax increace and the industry’s profits) (Gilmore, Tavakoly et al. 2013).

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

The establishment of a cigarette tax policy would contribute to the reduction of cigarette consumption, because the equilibrium price of the market would increase and considering the consumer's budget constraint, the quantity demanded would decrease. In this sense, the demand model is optimal to represent the establishment of this policy and the reduction of cigarette consumption as a consequence. Because this model specifies the demand equation so that the quantity of cigarettes demanded is a function of cigarette prices, consumer income, and tax policies.

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.

A new study from the University of Minnesota Run by R.J. Reynolds in the economics department found in 2011 That in all the states that have significantly raised their cigarette taxes 10 percent , Almost all pack sales have gone down sharply, Except the least selling brands. While some of the decline in pack sales comes from most interstate smuggling and from smokers going to other lower-tax states to buy their cigarettes, reduced consumption and will save your live with health benefits by 7 years from smokers quitting and cutting back plays a more powerful role. R.J. Reynolds says, “If prices were 10% higher, 12-17 incidence youth smoking would be 11.9% lower”( Reynolds 1). It is clear that price has a pronounced a very large impute on smoking of teenagers and young adults, that the goals of reducing teenage smoking and balancing the budget would both be served by increasing the Federal excise tax on cigarettes. Even though there are other bigger factors to look up to , Looking at all the big trends from cigarette price trends and overall consumption in the U.S. from 1969 to 2010 shows that there is strong connection between increasing cigarette taxes , decreasing consumption and major health benefits. Reynolds says Smokers are two to four times more likely than nonsmokers to develop coronary heart disease. Even low levels of tobacco exposure, including occasional smoking or

"Smokers have more diseases than nonsmokers”, in other words, “nonsmokers are healthier than smokers” (Leu & Schaub, 1983). If the population of people smoking decreases, there will be a large amount of savings in healthcare costs, however, only for a short duration of time. Within 15 years of the process (of smoking population decreasing), health care prices will increase dramatically to 7% higher for men and 4% higher for women (Barendregt, Bonneux & Van Der Maas). In the meantime, the article further explained the economic consequences and showed 2 points of view regarding the idea of having cheaper health care costs for smokers.

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

Nowadays in the present world smoking cigarettes has become a trend for every age of people and they take it as a fashion. A statistics shows that nearly $8.37 billion are used by the cigarette industries on advertising and promotions annually. And almost $23 million are used every day for the same purpose. The production and sale of cigarettes not only has negative impact on human health, it can even cause death. Because of smoking more than 5 million people dies every year and it will cause 8 million deaths annually by the year 2030. Though it is a very serious issue for the generation, no one is actually giving any care to this topic. However, these people tend to