week 4 assignment eco - Taxatio n 1 T axation on Tobacco...

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Taxatio n 1 Taxation on Tobacco Lisa McClure Axia College of University of Phoenix ECO 205 Nathan Janysek October 12, 2008
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Taxatio n 2 This paper is on that taxation of tobacco sales. For centuries, tobacco has been considered an ideal consumer good for taxation. It is not a necessity, it is consumed widely, and demand for it is relatively inelastic, so it is likely to be a reliable and easily administered source of government revenue (Canaan, 1999). Two centuries later, almost all governments tax tobacco, sometimes heavily, by a variety of different methods. Their motives have usually been to generate revenue, but in recent years, taxes have also reflected an increasing concern with the need to minimize the health damage of smoking stated by Canaan (1999). The Federal cigarette tax was initially adopted in 1864, Doubled to 16 cents per pack in 1983, and is now currently 39 cents per pack, as of 2006 (Chaloupka, 2006). State cigarette taxes average 96.1 cents per pack (26.5 cents in tobacco growing states; 105.4 cents in other states) and sales tax applied to tobacco products in most states (Chaloupka, 2006). Specific tobacco taxes, added as a fixed amount to the price of cigarettes, allow the greatest flexibility and allow governments to raise the tax with less risk that the industry will respond with actions that keep low the real amount charged (Canaan, 1999). Taxes may vary according to the place of manufacture or the type of product; for example, some
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This note was uploaded on 05/10/2009 for the course ECONOMICS 205 taught by Professor Janysek during the Spring '09 term at University of Phoenix.

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week 4 assignment eco - Taxatio n 1 T axation on Tobacco...

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