Economics of Cigarette Taxes

Travis WalstromIM 204

Flanders

I want to find out why the government taxes peoples cigarettes, and what adverse effects it has on a rational persons behavioral choices. I would like to help the reader understand what happens to cigarettes or any item in question when the government chooses to tax it. Also, there is a bigger issue that surrounds the topic of taxing and cigarettes. “Should the United States Government be a big brother and guide my personal purchases and decisions?” To me that is answered by my statement that “The United States Government has a role to play to encourage positive choices, but the government at any level cannot force these choices upon us it’s citizens.”

The Question

“Should the United States Government be a big brother and guide my personal purchases and decisions?” To me that is answered by my statement that “The United States Government has a role to play to encourage positive choices, but the government at any level cannot force these choices upon us it’s citizens.”

Thesis Statement

Research Strategies

The overview of this topic was suggested by my Economics advisor. This topic explained to me was a simple economic issue that everyone can relate to and yet can have implementations of economic terms and research to back up the information. Once I had my topic chosen the next step was to begin searching. In my research and study strategies class we went over how to search libraries for books, periodicals, newspapers, government sources and countless other library materials. While the library had great references on books, magazines, and periodicals, I found that simply jumping also on Google had it’s advantages. Some scholarly articles were available upon searching that I could use for comparison and a few website resources were available between both Library searches and Google searches. I found MNPals was my best choice to find research materials via the Library. MNPals helped me find and hunt down the majority of my book references and video streams.

Material Evaluation

Good material are scholarly and peer reviewed articles.

I chose to include information from mostly scholar information and newspaper articles

I chose to exclude biased information, such as websites that are biased against smokers

What I FoundFrom analyzing the cigarette tax across different states I foundvery adverse effects. What I found was that state governments haven’t considered the economic theory of unintended consequences. What this means is that the government hasn’t taken into account the multiple drawback and flaws of the cigarette tax.

The unintended consequences of such like the state of New York proved that citizens chose not to pay for the cigarette tax within New York. Instead people would cross state boundaries and buy cigarettes in bulk for a cheaper price and drive back.The state of New York proved that only give the state very low unintended cigarette funding but also give no funding of cigarettes at all from such an elaborate tax hike. Some of my scholarly articles explained how people work around the cigarette tax by rolling their own tobacco sometimes making hundreds of hand rolled cigarettes at the price of one normal pack

Interesting Facts(Note: These statistics are exclusive to each other.)

25% of smokers are not likely to quit due to a tax increase.

15% of smokers would drive across state borders to buy cheaper tobacco.

30% of cigarette smokers expressed interest in switching to hand rolled non taxed tobacco.

50% want to quite regardless of tax or price.

What I Learned

I found it very interesting that half of cigarette smokers want to quit smoking wether it’s for health or income related reasons. Also I found it interesting that cigarette smokers are willing to save a lot of money by going to cheaper states to purchase cigarettes in bulk. Not only have I learned this adversely affects a smokers pattern (they are likely to smoke more when they have a larger amount purchased) but the state expects a certain amount of income from cigarette purchases. The state usually ends up spending the money before it’s taken in thus accruing a deficit from adverse cigarette revenue.

It’s also interesting that some smokers are not willing to quit smoking. I’m not sure if that is from addiction or they truly enjoy to smoke? What I can take from this is that some people truly enjoy smoking and I nor the government can’t stop them. As long as they don’t bottleneck the entrance to the building with tobacco then I won’t put up a fuss.

BibliographyTennant,Richard.: The American Cigarette Industry; A study in Economic Analysis and Public Policy. Hamden, Connecticut: Archon Books, 1971.

Evans, Matt. “Cigarette Tax Measure May Have Unintended Consequences.” Portland Business Journal. (11/3/1996): Web. November 5th 2011 <http://economics.about.com/gi/dynamic/offsite.htm?site=http://portland.bizjournals.com/portland/stories/1996/11/04/editorial4.html>.

LaFaive,Michael. “The Unintended Consequences of Cigarette Tax Hikes.” Mackinac Center for Public Policy. (12/13/2002): Web. 15 November 2011. <http://www.mackinac.org/4927>.

McMahon, Patrick. “States Consider Cigarette Tax Hike.” USA Today. (1/13/2002): Web. 1st of November 2011. <http://www.usatoday.com/news/nation/2002/01/14/usat-cigtax.htm>.

Chloupka, Frank.”The Economics of Smoking.” National Bureau of Economic Research Working Paper. 25 pages. Print.

Phizer Health Channel. Phizer, Web. 22 November 2011.<http://www.youtube.com/user/PfizerHealth?v=sDp3uUHqzC0&feature=pyv&ad={creative}&kw={keyword}>.

Warwick, Terry, prod. Cigarettes who profits? who dies? . Yorkshire television, 1992. Videocassette. <http://plus.mnpals.net/vufind/Record/001134961/Holdings>.

McMahon, E.J. “NYC Cigarette Tax Hike Endangers Pataki Health Funding.” New York Fiscal Watch The Empire State. (October 17th 2007): Web. 20th of November 2011.<http://www.nyfiscalwatch.com/html/fwm_2002-05.html>.

Putting Out the Fires: Will Higher Taxes Reduce the Onset of Youth Smoking? - Philip DeCicca, Donald Kenkel and Alan Mathios. Journal of Political Economy v110, n1 (February 2002): 144-69.

“State Tobacco Taxes.” A Win-Win-Win Situation. Campaign For A Tobacco Free Kids, Web. 26 November 2011. <http://www.tobaccofreekids.org/what_we_do/state_local/taxes/>.