Taxation on cigarette is believed to have a certain degree of reduction in cigarette demand. This indicates that some individuals can no longer stand and provide the smoking habit expenses. Though, no matter how much taxes increase, most smokers will acquire means of navigating through the tight cigarette budget.
Taxation increase in cigarette will have numerous effects apart from the reduction on the number of smokers. Increase in cigarette tax will help boost the health of the young and the smokers. This portrays that only a few will be involved in the smoking habits, the quitters will reduce their effect of the attack by respiratory related infections caused by smoking. Similarly, the financial status of the smokers will be amplified. Quitting smoking, the smokers can begin saving plans for the money that would rather be used in the purchase of cigarette. In so doing, increase in cigarette taxation will help lower the rate of poverty among the smokers.
Distribution effects on cigarette taxation are that the taxation may dissuade smokers from purchasing the cigarettes. In response to this, cigarette companies lower their prices so that the smokers can afford to purchase. Though, the state taxation proves it extreme expensive for the smokers to afford cigarette purchase. Taxation on cigarettes varies from state to state, smokers may cross states to purchase cheap cigarettes. In addition, the poor pay more taxation than the rich individuals.
In most cases, the state uses the revenues in designing programs aiming at preventing tobacco use. According to statistics, the state collects about $24 billion as tobacco taxation each year. The center for disease control indicates that 7% of the taxation is spent on the prevention programs. Though, the statistics indicate that the government spends less than half of $15 billion in dealing with the increased health expenses due to cigarette smoking.
References
Chaloupka, Frank J. Cigarette Excise Taxation: The Impact of Tax Structure on Prices, Revenues, and Cigarette Smoking. Cambridge, MA: National Bureau of Economic Research, 2010. Internet resource.
Viscusi, W K. Cigarette Taxation and the Social Consequences of Smoking. Cambridge, MA: National Bureau of Economic Research, 1994. Print.
