Tuesday, March 22, 2011

Should Cigarette Taxes Be Lowered?

Recently the New York Times reported about a proposal in New Hampshire to lower cigarette taxes. Opponents of the tax claim that it will hurt revenues and encourage new smokers. They're wrong on the first claim, but might be right on the second claim -- which is actually good for the country.

It has been proven time after time that when taxes are reduced, increased volume will make up for the lower tax rate. If the opponents of a lower cigarette tax in New Hampshire are correct about a lower tax encouraging new smokers, then it means that these new smokers will buy cigarettes and increase the volume of cigarette sales, leading to increased government revenue in the long-run.

Greater sales numbers of cigarettes helps companies that make cigarettes. Companies like the R. J. Reynolds Tobacco Company, Philip Morris, and the Lorillard Tobacco company employ thousands of Americans. More sales could give these companies a need to expand production, and a need to hire more employes creating jobs. With 8.9% unemployment, the country could use these these jobs.

To give American companies an advantage, an idea that states should look to is to keep taxes the same on imported/foreign cigarettes, and reduce the tax on American cigarettes. This would provide an incentive for smokers to switch brands from foreign to American, and incentivize new smokers to go with American-made cigarettes instead of foreign made ones, helping the economy.

3 comments:

  1. Under Obamacare, smokers can get free cancer treatment and care. Maybe tax should go up to cover Obamacare since it will cost trillions?

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  2. You must be a moron. No higher taxes for Obamacare. Repeal it and repeal the Obama tax hikes.

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  3. So the government should encourage smoking then not care for people who get cancer?

    ReplyDelete