I was asked today to share my thoughts on the question of
Do taxes imposed on cigarettes to discourage public use really work?
She wanted to know particularly two things:
- Improved social well being
- Create distortion which causes a dead weight loss
I thought i'd post my response here for everyone. What do you think?
-----My Answer-----
the new fad for states to shore up their budget deficits by increasing tobacco taxes is gaining in popularity, however, the benefits of such programs are hotly debated.
Let's look at your two questions:
1- Improve Social Well Being
There are many who favor using oppressive taxes to modify the behavior of citizens, and smokers are an easy and popular target. Groups such as the Campaign for Tobacco Free Kids are calling for a $1 increase across the board and call it a WIN WIN WIN for states. They reason:
A budget win
In this they are right, raising tobacco taxes $1 a pack can raise millions of dollars for state coffers. For example: Such an increase could result in an estimated $480.1 million in new revenue for a state like Florida.
Faced with budget crunches, many states are eyeing this as an easy way to quickly increase revenue.