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Tobacco Tax Research Paper

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Goal:
To decrease the use of tobacco products in the U.S.

Prescribed Action:
Increase taxes: In 2009 The Family Smoking Prevention and Tobacco Control Act was passed authorizing the Food and Drug Administration to regulate tobacco products. It also preserves the traditional role that state and local governments have in trying to reduce tobacco use. Most states have incrementaly raised their excise taxes, specifically for cigarettes in the form of a unit tax, which is based on a constant nominal rate per unit or pack of cigarettes. States and more recently the federal government have increased tobacco taxes, both to decrease tobacco use and to generate revenue.
Set minimum cigarette prices: In addition to raising taxes, most states set a minimum price for cigarettes. In general, the minimum price is the wholesale cost of cigarettes paid by the retailer plus an additional amount, representing the business cost for the retailer. No retailer is allowed to sell cigarettes below the minimum price. In other words, cigarette manufacturers have less opportunity to dampen the effect of tobacco tax increases. …show more content…

Department of Health & Human Services 2000 report by the Surgeon General. Increasing the price of a pack of cigarettes by ten percent has been shown to reduce smoking rates by an average of 4.8 percent (a mean price elasticity of -0.48) as more smokers quit and fewer potential smokers start. This effect is greatest among youth and low income consumers, who are particularly sensitive to price. However, inelastic goods, such as tobacco, have fewer substitutes and a price change will not have a significant influence on the quantity demanded. In the long run, time may be the greater influece as it moves the elasticity of cigarettes to one that is more elastic, if the smoker finds he can no longer afford the $2 per pack and eventually begins to kick the

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