Chapter 4
Fewer smokers’ means less tax revenue
More people are kicking the habit as states impose restrictions, higher cigarette tariffs
This article is all about smoking and taxes. In the United States of America, over one fifth of American adults smoked in 2005 compared to one fourth a decade ago. States collected 2.8 billion fewer taxes from cigarettes in 2005 than they did five years before. Minnesota’s tobacco tax revenue is expected to decline later this year. The drop in Minnesota’s government revenue may even go down quicker with the expected passage of a state wide smoking ban. Across the United States, states are putting their treasuries under risk by putting higher cigarette taxes and placing smoking restrictions, which appear to be discouraging people from smoking, as many health activists had hoped would happen. States could also save some money from medical issues because of reduced smoking, but there is no set amount yet, and the saved money from fewer smokers could balance the loss of revenue lost from raising the cigarette tax. “Minnesota’s Department of Human Services estimates it spends $295 million a year to treat smoking-related illnesses for 647,000 people on public assistance.” paragraph 9. The decline in loss of revenue from smoking won’t greatly affect the government because it is declining gradually since it is inelastic. The federal cigarette tax has dropped from $8.1 billion in 2002 to $7.7 billion in 2005, according to a study by the tobacco industry. Cigarette taxes are now “a lousy way to fund your government,” said David Brunori.
This article relates to chapter four because this form of taxing is an indirect tax. An indirect tax is a tax levied against someone (the supplier), and is expected to pay for by another individual (the consumer). An excise tax is an example of an indirect tax. The government needs to decide how much they should tax people for products. They do this by what is called the ability-to-pay approach. In this case, the government most likely won’t dramatically increase the tax on cigarettes even though it is inelastic because if they do, the population of adults who smoke in the United States will be unhappy and could even protest. Therefore the government party in charge will lose over twenty percent of their votes for the upcoming election. The tax of cigarettes is similar to a proportional tax since the percentage of tax remains the same regardless of an individual’s income. The States won’t need to have stabilization payments for their taxation on cigarettes because the chance of a large majority of people quitting smoking is small.
In my own opinion, the increase in tax for cigarettes is a good idea because even though it won’t stop all people from smoking, it will stop some. I also believe that the decrease in smokers will make people healthier and reduce the need of intense medical assistance. I think that this will balance a portion of the loss in revenue for the government but not a majority because there is always second hand smoke. In my personal life, right now I am getting ill because of too much second hand smoke (nothing serious). I won’t explain the details of how I took in too much second hand smoke but I was breathing second hand smoke for about five hours at a party in a room next to a handful of people who were smoking. To make things clear I do not smoke and I don’t intend on starting it because of this personal experience. I highly encourage people to not or stop smoking because it is bad for your health and also your wallet. You can also think of it like this, if you stop buying smokes then the government won’t make any revenue from their high taxation on cigarettes, so you can stick it to the man!
Link to article: http://www.timesleader.com/mld/timesleader/living/16737988.htm
More people are kicking the habit as states impose restrictions, higher cigarette tariffs
This article is all about smoking and taxes. In the United States of America, over one fifth of American adults smoked in 2005 compared to one fourth a decade ago. States collected 2.8 billion fewer taxes from cigarettes in 2005 than they did five years before. Minnesota’s tobacco tax revenue is expected to decline later this year. The drop in Minnesota’s government revenue may even go down quicker with the expected passage of a state wide smoking ban. Across the United States, states are putting their treasuries under risk by putting higher cigarette taxes and placing smoking restrictions, which appear to be discouraging people from smoking, as many health activists had hoped would happen. States could also save some money from medical issues because of reduced smoking, but there is no set amount yet, and the saved money from fewer smokers could balance the loss of revenue lost from raising the cigarette tax. “Minnesota’s Department of Human Services estimates it spends $295 million a year to treat smoking-related illnesses for 647,000 people on public assistance.” paragraph 9. The decline in loss of revenue from smoking won’t greatly affect the government because it is declining gradually since it is inelastic. The federal cigarette tax has dropped from $8.1 billion in 2002 to $7.7 billion in 2005, according to a study by the tobacco industry. Cigarette taxes are now “a lousy way to fund your government,” said David Brunori.
This article relates to chapter four because this form of taxing is an indirect tax. An indirect tax is a tax levied against someone (the supplier), and is expected to pay for by another individual (the consumer). An excise tax is an example of an indirect tax. The government needs to decide how much they should tax people for products. They do this by what is called the ability-to-pay approach. In this case, the government most likely won’t dramatically increase the tax on cigarettes even though it is inelastic because if they do, the population of adults who smoke in the United States will be unhappy and could even protest. Therefore the government party in charge will lose over twenty percent of their votes for the upcoming election. The tax of cigarettes is similar to a proportional tax since the percentage of tax remains the same regardless of an individual’s income. The States won’t need to have stabilization payments for their taxation on cigarettes because the chance of a large majority of people quitting smoking is small.
In my own opinion, the increase in tax for cigarettes is a good idea because even though it won’t stop all people from smoking, it will stop some. I also believe that the decrease in smokers will make people healthier and reduce the need of intense medical assistance. I think that this will balance a portion of the loss in revenue for the government but not a majority because there is always second hand smoke. In my personal life, right now I am getting ill because of too much second hand smoke (nothing serious). I won’t explain the details of how I took in too much second hand smoke but I was breathing second hand smoke for about five hours at a party in a room next to a handful of people who were smoking. To make things clear I do not smoke and I don’t intend on starting it because of this personal experience. I highly encourage people to not or stop smoking because it is bad for your health and also your wallet. You can also think of it like this, if you stop buying smokes then the government won’t make any revenue from their high taxation on cigarettes, so you can stick it to the man!
Link to article: http://www.timesleader.com/mld/timesleader/living/16737988.htm
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