Increase in Cigarette Tax

Despite of the fact that serious health risks are caused by the cigarette smoking, there has been a considerable increase in the smokers since the introduction of cigarettes in the mid-twentieth century. Though government has imposed several restrictions on the production, sale and the use of cigarettes, there has not been any significant reduction in the use of cigarettes.

Cigarette taxes are usually proposed to cause smokers to reduce smoking but, eventually, come out as a great source of tax revenue to the government due to the addiction caused by the continuous smoking. People don’t even care about their health, making the demand for cigarettes price inelastic.

What happens if the government increase the taxes on cigarettes?

Increase in the price of cigarettes does bring a reduction in the demand but not in a substantial amount. There are no substitutes available for the cigarettes and so addition of such products encourages people to indulge in illegal activities like theft to continue buying even after increase in taxes. Some people also avoid paying taxes by smuggling cigarettes. Increased taxes also promote inequality as poor people cannot give up easily and pay for higher taxes than rich people because rich people are more likely to give up in context of higher taxes.

A higher tax also enables the government to spend more on health care campaigns, rehabilitation centres and campaigns to encourage people to stop smoking.

It is even said that higher tax is not required because smokers are also made to pay for social costs, which is served as a tool to reduce demand for cigarettes and to increase social efficiency.

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