From Reuters:
Higher state taxes on smoking are producing sharp declines in tobacco consumption in the United States, just as Congress considers a huge federal cigarette tax hike, USA Today reported in its Friday editions.
The newspaper, conducting its own analysis of taxation and consumption figures, said the degree of decline in smoking appears to be tied directly to the size of the tax increase.
For example, cigarette sales fell 18 percent in North Carolina last year after the state tax was raised in two steps to 35 cents from a 5 cents, the newspaper said.
Demand curves slope downwards. This is no revelation.
Now, I think it is wrong to use tax policies to reward or punish consumption that a discrete set of lawmakers at a specific moment in time dislikes. And I can’t help pointing out something about lawmakers who understand that, other things being equal, consumption of a good declines if the price is increased, and that’s why they want to use tax policy to decrease consumption of cigarettes. They’re frequently the same ones who can elsewhere be found arguing in favor of increasing the costs of labor and pretending that the consumption of labor will remain unchanged.
Or here, they tie the tax increase to an expanded government program, essentially linking it to a declining industry:
The Senate last week approved a $35 billion tobacco tax increase as a way to pay for expanded government health care for children. Meanwhile, the House of Representatives has proposed its own plan to provide health care to children through higher tobacco taxes and cuts in payments to private insurers in the Medicare Advantage program for the elderly.
