NCPA - National Center for Policy Analysis

Five Things to Consider Before Raising Tobacco Taxes

August 18, 2011

Imposing high taxes on tobacco products is widely used to discourage smoking.  Taxes on tobacco products already are so high in most places that legislators in the United States should be skeptical of proposals to increase them any further, says Eli Lehrer, vice president for Washington, D.C., operations at the Heartland Institute.

In some cases and in some places, it is possible that some legitimate public health goals might be advanced through higher or different kinds of taxation, but the bulk of the evidence argues against further increases in tobacco taxes.  Anyone considering a proposal to increase tobacco taxes should recognize the following five realities with significant support in the academic research on tobacco control:

  • Current costs imposed on smokers -- the costs they impose on themselves, as well as the costs imposed by government -- typically exceed the social costs of smoking.
  • Tobacco taxes place a much larger burden on lower-income people than on the well-off.
  • Tobacco tax increases are not necessarily the best way to discourage smoking.
  • Black markets for cigarettes develop as taxes rise.
  • Tobacco taxes often produce less revenue than expected and sometimes reduce revenue overall.

Increases in cigarette taxes hit the poor most heavily, while the programs funded by these taxes do not provide a direct benefit to those individuals who pay the taxes.  It would be difficult or even impossible to design a scheme in which poor smokers would be the focus of benefits from the taxes they pay to support their habits.  Even if one places the public health goal of smoking reduction above all other considerations, raising taxes is not necessarily the most effective way to achieve it.  Educational campaigns and bans on smoking in public places appear to be much more efficient, says Lehrer.

Source:  Eli Lehrer, "Five Things to Consider Before Raising Tobacco Taxes," Heartland Institute, July 2011.

For text: percent20Lehrer percent20on percent20Tobacco percent20Taxes.pdf


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