The essay "Cigarettes and Smokers Regarding The Economy" describes that cigarette is a legal good but its harmful effects surpass the pleasure it gives. If the supply and demand for cigarettes were both unitary elastic, then the burden of tax would have been shared equally by the producer and the consumer…
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Cigarettes taxes are most effective in reducing consumption of the young population or more precisely children and teenagers who get pocket money and are not financially independent (Chaloupka). People who try cigarettes for thrill will be put off greatly by a significant amount of sales tax. But for hard-core consumers of cigarettes, quitting is not easy at all as they experience withdrawal symptoms if they try to quit. They will be willing to forgo their consumption of other products but cigarette. Foregoing the consumption of other products does not curb the need for them. Therefore, hard-core smokers tend to resort to shop lifting because after spending on cigarettes they are left with very less money. The sellers of other products will incur losses because hardcore smokers are willing to sacrifice products like biscuits, sweets, chocolates or magazines for cigarettes. Sometimes when the government announces a rise in sales tax on cigarettes, it takes time for the tax to come into effect. In the mean while smokers buy cigarettes in bulk so that they do not have to pay the higher price for a packet of cigarettes. So this bulk buying should be taken into account before the government imposes sales tax.
Some economists are of the view that a sales tax on cigarette will be more effective in the long run than in the short run because smokers readily adjust to price in the short run. If the price is permanently increased from let’s say $2.5 to $5.0 for a packet of cigarettes then the long run impact will be double the short run one and a lot of people will be able to overcome the habit altogether.
Imposing a sales tax on cigarettes is just not enough. The revenue generated from sales tax should be invested in Health Programs dedicated to discouraging smoking. Also filtered cigarettes should be taxed less than the unfiltered ones. However the difference in the tax rates for the two should not be very large. Besides this taxation policy, there should be a ban on cigarette advertising and it should be made mandatory that the hazards of smoking be mentioned on a packet of cigarettes. With no advertising, the attractive packaging also lures consumers. The government should come up with a generic packaging design that is less appealing to consumers. It should be obligatory on retailers to sell cigarettes to people who have attained the age of majority (18 years old). Government sponsored campus drives at different schools and universities should be held in which lectures on negative effects of smoking should be conducted. Student volunteers can also be hired by the government to spread awareness. There should be tariffs imposed on the cheap cigarettes imported from other countries. Sales taxation alone cannot deter consumers from smoking. Like other economic policies, taxation should be carried out with above mentioned measures to ensure good health of all.
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“Cigarettes and Smokers Regarding The Economy Essay”, n.d. https://studentshare.org/macro-microeconomics/1391342-economics.
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