Cigarettes are among items president Obama plans to use in raising a half trillion dollars through tax hikes. The government plots to make seventy-eight billion dollars from an increased tax on cigarettes over the next ten years (Hargreaves). As a result, the cigarette tax is anticipated to rise by 94 cents per pack.
According to the national budget, this increase is expected to alleviate smoking and fund education (Hargreaves). Most smokers are middle or low-income earners. Given that, this burden is likely to be transferred to the poor. Moreover, as companies try to cope with reduced sales, jobs will be lost. This essay provides an insight into the debate surrounding cigarette smoking and public health.
An increase in prices of cigarettes is expected to have profound benefits on the public health sector. Most importantly, young Americans are set to benefit immensely from this action. Research shows that tax increase on cigarettes minimizes smoking (Hargreaves).
For instance, there was a 10% drop in cigarette sales when tax per pack was in increased by 62 cents in 2009. A study by the Center for Disease Control and Prevention found out that smokers cost treasury 193 billion each year (MSN Smart Spending Editor). These costs are associated with medical bills and lost productivity.
Additionally, 443,000 people die from smoking-related ailments yearly. This is a clear indication that smoking is the main cause of avoidable deaths. Any tax increase on cigarettes is, thus, a positive step towards the ban on smoking.
Increasing cigarettes tax might be counterproductive to development in the US. Many smokers fall in the low and middle-income brackets. Therefore, the tax load will be passed to the deprived population. According to Hargreaves, a non-smoker had an average household wage of 45,761 dollars in 2011.
In contrast, a smoker averaged around 27,700 dollars. With the harsh economic conditions in mind, increasing taxes for low and middle-income earners is a ludicrous thing. These people are yet to recover from skyrocketing prices of food and gas. Moreover, low sales, due to high prices, might force cigarette companies to lay off workers. Consequently, the US economy, which is on a recovery path, will be affected negatively.
The US has a mixed economic system. In this regard, most services are offered by the private sector. However, the government has the rights to regulate the private sector. Before the government regulates an industry, an opportunity cost must be found. Consequently, an alternative to the cigarette industry must generate similar jobs and revenue. There are talks of electronic cigarettes taking over from the conventional ones.
E-cigarettes are not a product of tobacco and, therefore, do not have serious health issues. Although their effects on the user are yet to be fully established, they are not known to have negative externalities. In economics, an externality arises after production and consumption of goods and services impacts on a third party (Negative Externalities). Most externalities associated with cigarette smoking are negative. A substitute for cigarettes is, hence, expected to have minimal health issues.
Cigarette smoking produces little marginal social benefits. Smoking profits the user, but leaves the general public with serious health issues. This makes cigarettes typical examples of products with negative externalities. Nonetheless, the tobacco industry is a source of employment and revenue. For that reason, a country can only forego cigarettes for a product that generates better results.
Hargreaves, Steve. “Obama Calls For Cigarette Tax Hike of 94 Cents A Pack.” CNN, 10 Apr. 2013. Web. 11 Sept. 2013. <http://money.cnn.com/2013/04/10/news/economy/cigarette-tax/index.html>
MSN Smart Spending Editor. “How Obama care premiums penalize smokers.” MSN Money, 20 Aug. 2013. Web. 11 Sept. 2013. <http://money.msn.com/health-and-life-insurance/article.aspx?post=56fc1dca-e9c4-4168-b928-e6106fb1c528>
“Negative Externalities of Smoking.” Sophia H Economics. 6 Feb. 2013. Web. 11 Sept. 2013. <http://sophiaheconomics.wordpress.com/2013/02/06/negative-externalities-of-smoking/>