This website uses cookies to ensure you have the best experience. Learn more

Taxation And Cigarettes Essay

3540 words - 15 pages

Cigarette and Tobacco taxation has been a hot topic for years. Typically, the taxing of this product is accepted as there are health concerns associated with the consumption of tobacco products. The concept of raising cigarette taxes aligns with goals of increasing revenue for local, state and federal governments, and also works to increase the overall public health of the country. Although the taxation is widely accepted, there are concerns associated with who the taxation effects primarily, how funds are being utilized and issues with meeting budget goals with the earned revenue. This paper addresses each of these topics in an effort to identify the effectiveness of cigarette ...view middle of the document...

The report highlighted all the health consequences of tobacco use. It further held cigarette smoking responsible for a 70% increase in the mortality rate of smokers versus non-smokers. Furthermore, it indicated that cigarette smokers are at a 9 to 10 fold chance of developing lung cancer (National Library of Medicine).
The Surgeon General’s report on smoking and health greatly impacted the public attitudes and policies towards smoking. It started with labeling cigarettes with the Surgeon General’s warning to prohibiting advertisements on television and radio (National Library of Medicine). Furthermore, with the public health concern, the government began enacting heavier taxes on tobacco products with the hopes that higher taxes would reduce the consumption of cigarettes and other tobacco products.
According to Gruber and Koszegi (2008), the consumption of tobacco products is said to be the leading cause of preventable death in countries that are considered developed or developing. Furthermore, there are more than 390,000 early deaths that are caused by cigarettes in the United States (Wasserman, 1992). If the consumption of tobacco products continues on its current path, it is anticipated that in a few decades, 10 million people will lose their lives to tobacco related deaths (Gruber & Koszegi,2008).
Prior to the 1964 Surgeon General’s Report, the taxes on tobacco products were thought to be valid only for raising revenue for the government, after the report, it was thought that there needed to be some regulation on the consumption of tobacco. Excise taxes became an integral part of the regulation on cigarette and tobacco consumption. The basis of the excise tax was founded on simple economic theory and the laws of supply and demand. The assumption is that if the prices of the cigarettes are raised due to taxation, fewer taxes will be consumed by the public.
Economic Theory and Cigarette Tax
Meirer and Licari (1997) discuss that the theory associated with the cigarette tax is that of supply and demand. This is a basic principle in economics and aids individuals in making decisions for organizations as well as in areanas of public policy. Bayes (2011) indicates that the Law of Demand follows that the price and the quantity demanded are inversely related, that is if the price increases, the demand decreases and vice versa. With regard to the supply function, it is noted that taxes, specifically excise taxes are a supply shifter. An excise tax indicates that there will be a tax on each unit sold by the supplier. The government then obtains the revenue from that tax from the supplier. This indicates that the supplier must receive that additional tax rate from the consumer in order to pass it along to the government if they are going to continue supplying the product along the same supply curve.
As with all consumer goods, it is of utmost importance to grasp the price elasticity of a product in order to...

Other Essays Like Taxation And Cigarettes

Itc Case Study

3673 words - 15 pages to prolonged punitive taxation • Cigarettes (15% of tobacco consumption) contribute the bulk of Revenue to the Exchequer from tobacco sector Ø 48% of adult Indian males consume tobacco . Only 10% of adult Indian males smoke cigarettes as compared to 16% who smoke biris and 33% who use smokeless tobacco (Source: Global Adult Tobacco Survey India 2010) Ø Biri : Cigarettes ratio = 8 : 1 Ø Annual per capita adult cigarette consumption in India

Marijuana Persuasive Essay

895 words - 4 pages added to drinks, while still maintaining its medicinal properties. Even adding to the fact, marijuana has been proven to be less harmful than cigarettes, and nobody has ever overdosed or died from smoking marijuana (Sulluman, Jacob). With a drug that seems quite safe, and offers many different uses, you would think the government would be using it in some way. Whenever a drug is put on the market, regulation of that substance is needed to keep drug

The Impact of Political, Legal and Social Factors on Two Businesses

1841 words - 8 pages revenues. Taxation can affect every business in the world including Toys ‘R’ Us. Taxes are collected by national government and local government. Taxation helps the government ti raise revenue and also enables it to discourage various activities and to encourage others. This can include many things such as: cigarettes to discourage smoking or high fuel composition cars to discourage pollution. In March of every year, the government release information

Marijauana Legalization

746 words - 3 pages estimated 21 billion dollars a year would be brought in if marijuana was legalized; this would come from the taxation of the crop, and also the money spent to prevent the use of “criminals” who use this drug, who would no longer be incarcerated saving billions of dollars nationwide. Similarly, law enforcements could turn their focus to more important crimes, such as murder, theft, etc. instead of ruining the lives of individuals who are trying to enjoy

Glossary of Terms


Free Market vs Planned Economy

1311 words - 6 pages consumers take a free ride since no one can be excluded from consuming them so it is almost impossible for a private firm to get anyone to pay for a public good. In a planned economy the state can finance the provision of public goods like defence and police service, by means of taxation and sometimes borrowing, local authorities provide street lighting and flood control can be provided by giving contracts to private sector firms. Production

Price Elasticity of Supply - Essay

778 words - 4 pages chooses to intervene in the price mechanism.Some relevant issues that directly use elasticity of demand and supply include: * Taxation: The effects of indirect taxes and subsidies on the level of demand and output in a market e.g. the effectiveness of the congestion charge in reducing road congestion; or the impact of higher duties on cigarettes on the demand for tobacco and associated externality effects * Changes in the exchange rate: The

Marijuana: America’s Forbidden Asset

1689 words - 7 pages The Centers for Disease Control and Prevention (CDC), there are 79,000 deaths annually attributed to alcohol abuse. That number includes disease, accidents and violent crimes. Cigarettes are responsible for 443,000 deaths per year with 49,400 of those resulting from exposure to second hand smoke.(Centers for Disease Control and Prevention, par. 12). That’s a combined 522,000 deaths every year attributed to just two legal substances. Cigarette

We Can Benefit from the Legalization of Marijuana

2310 words - 10 pages arrest, which ends up being approximately $13.7 billion each year (Earlywine, 2002, p. 235). On the other hand, if medical marijuana was legalized, the government would have the ability to impose taxes, including sin taxation, comparable to the sin tax on alcohol and tobacco, and standard taxation (Miron, 2010, pp. 15-17). This could easily add up to $6.42 billion in a year, with $4.28 billion going to the federal government, and the remaining

A Detailed Analysis Of The Film "Shawshank Redemption"

1223 words - 5 pages Tommy is shot, simply for trying to help Andy out of jail, lawfully. This would however put Mr. Norton's secrets in jeopardy.In prison, Andy meets a man named Ellis Redding. Red, as he was called, was a tall, dark skinned man and he was known for his ability to obtain things in prison. "Cigarettes, a bag of reefer if that was your thing, a bottle of brandy to celebrate your kid's high school graduation, damn near anything within reason". When Red

The Nordic Model

1284 words - 6 pages dissatisfaction of the brutal taxation. Although the Nordic Model has its problems, the benefits and the quality of life that results from it outweighs the bad, which is shown by the prosperous Scandinavian states. The Nordic Model is the term for the Scandinavian states economic system. The government equally provides the same thing for each of its citizens. Many things are provided by the government, like universities, health care, maternity

Related Papers

Smoking And The Economy Essay

2711 words - 11 pages cigarette tax increases. As we have analyzed the costs and benefits of the cigarette production and distribution industry, it’s quite evident there are flaws. The flaws take shape in a derived demand for the smuggling and selling of illegal cigarettes on the black market, due to high prices from legal market cigarettes. The high prices of market cigarettes are due to the direct taxation of the products that both consumers and producers have to

Altria Group, Inc Essay

2057 words - 9 pages disclose the ingredients used in the manufacture of cigarettes and, in certain cases, to provide toxicological information. Another challenge is the excised taxes. Cigarettes are subject to substantial taxation abroad. Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted within the United States, the European Union, and in other foreign jurisdictions. These tax

Itc Corporate Presentation Essay

3427 words - 14 pages -class products 15 Cigarette Industry in India  Legal cigarettes account for less than 12% of tobacco consumed in India due to a punitive taxation and discriminating regulatory regime  48% of adult Indian males consume tobacco. Only 10% of adult Indian males smoke cigarettes as compared to 16% who smoke biris and 33% who use smokeless tobacco (Source: Global Adult Tobacco Survey India 2010)  Annual per capita adult cigarette

Equilibrium Essay

1145 words - 5 pages to the firms where the firms could now spend money on their production but still earn enough money. Governments could also could intervene and influence the fundamentals of supply and demand by fixing prices, where setting the maximum prices which may be charged (called the price ceilings) or the minimum prices (called the price floors). Taxation is another major method government’s take part in changing the equilibrium using supply and demand