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Taxation of Tobacco
The taxation of tobacco I will be referring to is the taxation on cigarettes and will be talk about how this tax effects consumers and producers, how the tax effects supply and demand of cigarettes, and what might happen if a limit was placed on the amount of tax that can be imposed.
The current taxes placed on cigarettes are more than any other taxed good. However, this does not stop the American population of adult smokers. In fact, most smokers do not realize just how much the tax is. The taxes is merely pennies to the individual buyer, but add all the buyer together and the federal government makes more in one minute than the average smoker makes in one year. Averaging around 20 billion dollars per year. (Reynolds, 2008). A shocking analogy is that a consumer could purchase 533 six-packs of beer and still pay fewer taxes than they would on one carton of cigarettes. (Reynolds, 2008)
If all the smokers in American were aware of this shocking truth, the amount of smokers would more than likely decline. Where we are at right now the supply and demand for cigarettes is outrages.
The tobacco companies are producing record amounts of cigarettes and also offering deals and discounts to keep the consumers happy and smoking. One of the most logical reasons is that American smokers today have never known cigarettes to be tax free, so the price they are paying is just a normal fee.
The fact that most smoking related deaths occur in the lower income bracket shows just how insignificant the current tax is on cigarettes. The current tax is $.55 per pack. The smoking addiction is much more powerful than $.55. (ASH, 2008)
Now imagine there was a law imposed that set a specific tax on cigarettes and froze the tax in its place. What would happen to the producers and consumers? The logical outcome would be good for everyone, assuming you are not against smoking. The producers would be able...