In April 2009, Obama signed a 62
cent consumption tax increase on cigarettes. This tax increase was not done to decrease the
consumption of cigarettes, but to raise government revenue. As we have learned in class, the introduction
or increase in a consumption tax will reduce production of the good which will
increase its price. The increase in
price, however, do not go to producers, it goes to the government. This was the
real purpose behind raising the consumption tax on cigarettes. They wanted to raise funds for the expansion
of healthcare for children. A positive
side effect was that the number of smokers decreased, but the spending on
cigarettes increased
$18 billion in three years proving that a consumption tax does indeed
decrease the quantity bought, increase the price and increase the government
revenue.
I agree with you that in this case that consumption tax has worked positively. Then I think, maybe consumption tax should be used in the way like this. It will be good for people by using the increasing price because of the consumption tax and affecting the consumers' behavior.
ReplyDeleteThere's one interesting that I know from my friend, he said that the Chinese cigarette sold in the U.S. like those sold with free duty in the U.S. big airports are much cheaper than China. The price is doubled. Many Chinese buy Chinese cigarette in the U.S. airport.
The consumption tax in China is also very high.
Taxing cigarettes seems to be a smart move as while some people may quit as seen in this case many will find it to difficult to do so due to its addictive nature. This allows the government to gain even more revenues from taxing a product that many people will use in both a good or bad economy. It is also not considered an essential good and therefore will cause less outrage then putting a tax on say food staples.
ReplyDeleteI am not sure if the government should have done so by using the consumption tax, I think rather they could've. Since they are taxing the people for something they don't approve of I feel as rather they could taxed the companies producing cigarettes.
ReplyDeleteYes, I think highly of this policy. It can help the government earn profit at the expense of both the producers and consumers of cigarettes. Since as the prices of cigarettes raises, fewer people buy cigarettes, the producers will loss profit, too. A consumption tariff is better than import tariff and export duty in this case since the government do not want to support either the domestic producers or consumers in cigarettes industry.
ReplyDeleteA high tax does not always mean that government want to improve its earnings.
ReplyDeleteI think this tax can reduce the consuption volume of cigaretee in U.S. every year.So less people will be sick by cigatette.It is a good sign for the country.And it can also reduce the expenses of healthy insurance.
An interesting thing is that I noticed chips like Pringles in U.S. is much more expensive than that in China.I guess the reason is that Americans are overweighted on average.The government put more tax on the chip in order to reduce the comsuption volume.
I also agree that the consumption tax increases the revenue to the government and I also believe that it would reduce the number of people who buy the cigarettes. However I don't always think that they are all quitting.... I think they are going across the boarders to areas in which they can get them cheaper. I know I had family that drove semi-truck and they use to get cigarettes when they were in Mexico because they are much cheaper down there then in the US.
ReplyDeleteThe government increases its revenue by increasing taxes paid to them. Being that cigarettes are so widely popular and consumed at an extremely high rate. Taxing them is sure to bring in large amounts of revenue. Cigarettes are also detrimental to our health so the tax steers away potential or future consumers. I like Ted's idea of taxing other products that attribute to our country's obesity. Although it would be very difficult and would stir up some controversy. People were talking about a ban on movie theaters and gas stations from selling pops larger than 24oz. If instead they taxed them for being able to serve huge drinks, they could possibly benefit and gain some revenue in that sense.
ReplyDelete