Tobacco taxes and smoking
Date posted: November 9, 2012
Although not as dominant as it once was, tobacco production is still an important industry to North Carolina. Traditionally tobacco products have been subject to relatively high taxes. Do we know the impacts of those taxes on tobacco product users? N.C. State University economist Mike Walden responds.
“And …, what we’re primarily looking at here is a tobacco product is cigarettes. And of course cigarettes are heavily taxed. And we have an analysis — new analysis — from the National Bureau of Economic Research that looked at the impact of the 2009 federal tax hike, which increased taxes on a pack of cigarettes by 62 percent.
“Now what the study has found, and of course you have to go through a lot of statistical gymnastics to get this, but what the study found is that that tax hike was related to a reduction of smoking — particularly by young smokers — of around 10 percent.
“But because of the percentage increase of the tax was greater than the percentage decline in smoking incidents, actually tax revenue from this increase in taxes on cigarettes did go up to the federal government. So, the tax — the 2009 tax — did achieve its goals of, number one, reducing the incidence of smoking, but at the same time increasing revenue raised from the cigarette tax. Most of that revenue was used for health-care programs.
“So, this is one of a number of studies and I’m sure there will be more looking at what cigarette taxes due both to the incidents of smoking as well as to financial revenues to the federal government.”
Category: Economic Perspective