Tuesday, January 11, 2011

High Cost of Cigarettes Smoking

Cost of Cigarettes Smoking

There is no doubt that smoking carries many costs, and the most obvious being the cost of cigarettes. People who are interested in how much they are spending on cigarettes each year can multiply daily cigarette costs by 365. Another way to determine yearly expenditures on cigarettes is to use a smoking calculator, in which users enter the number of cigarettes smoked per day, price of a pack, and the number of cigarettes per pack.

Why Do Cigarettes Cost so Much

When you already determined what your monetary losses per year from cigarettes smoking are, you can realize that the price of cigarettes and the tax hike on them has been going through the roof over the past couple of years. The tax increases steadily rose over a period of months and sometimes even weeks and the cigarette manufacturers steadily raised the average price for a pack of cigarettes.

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Many people believe that the increase in the price of cigarettes is related to getting smokers to quit smoking. If cigarettes cost too much, then everybody will quit. This is a logical thought to have, but it is not the goal behind raising the price and tax of cigarettes. In February, 2009 President Obama signed legislation to increase taxes on cigarettes in order to expand the SCHIP in order to provide medical insurance to millions more children across the United States. SCHIP stands for State Children Health Program.

The legislation was the first federal tax hike for cigarettes in nearly a decade. The legislation increased the federal tax on cigarettes by 0.62 cents in February 2004 and steadily climbed to over a dollar in taxes. Basically smokers are now paying double for the same brand of cigarettes they were smoking several years ago.

Not only has the federal tax increased on cigarettes, but individual states have passed legislation to further tax cigarettes to fund various projects in the state. An example of state tax increase on cigarettes can be found in Arkansas. Arkansas does not have a Trauma Center, so, in order to fund the building of a Trauma Center in the state, the state passed legislation to raise taxes on cigarettes. California, for example, until recently had a relatively low state cigarette tax, but in January 1999, it ballooned to 87 cents a pack from 37 cents. In 2002, New York City raised the tax on a pack of cigarettes from 8 cents to $1.50, an astronomical increase of nearly 1,800 percent.

Tax Reasoning

At the heart of nearly every tax debate in America is some version of the Laffer curve, a fancy way of describing a point of diminishing returns. An income tax of 0 percent produces no revenue; an income tax of 100 percent, it is presumed, causes people to change their behavior so as to avoid the tax, also producing nothing. Some ideal point in between will yield the maximum possible revenue.

In the late 1970s and the 1980s, this very old thought was applied to income tax and burst into prominence as part of the supply-side economics revolution. and since that time, many public officials have espoused the thought that cutting taxes will increase economic activity — and therefore make higher revenue — while raising taxes will have the opposite effect.

Cigarette taxes don’t seem to behave this way (or at a minimum, we’ve yet to hit the point at which even huge tax hikes lead to lower revenue). indeed, in many states, the very notion of tax representing a part of the underlying cost of a pack of cigarettes — the way that, say, a tip represents a part of the cost of a restaurant meal — has stopped to have much meaning. When you’re paying, as New York City smokers now do, $12 for a pack of Marlboros, nearly all of that is tax; the product is, economically, an afterthought.

A cynical argument, frequently put forward by smokers and libertarians, is that states really don’t want too many smokers to quit, because they need the cigarette-tax revenue. There is some evidence for this. Every cigarette tax passed in recent years has been accompanied by rhetoric about getting people to quit. Yet earlier this year, the Centers for Disease Control found that of the 14 states (plus the District of Columbia) that raised cigarette taxes in 2009, none was using the additional revenue for anti-smoking efforts. Surprise, surprise…

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Why Do Cigarettes Get Tax Hikes and Not Other Products Such as Beer

When you purchase beer, milk, or a shirt from the mall you generally pay a flat tax rate of 0.07 to 0.10 cents per dollar on taxes. Many do not understand why smokers are being targeted for the funding of projects such as SCHIP or the trauma center in Arkansas. If you are a smoker and find this to be unfair then you may want to join some anti-tobacco tax increase groups, sign petitions, or write a letter to your state or federal leaders. At one point the government wanted to implement a Hamburger Tax. This tax would raise the taxes on fast food purchases in order to fund projects. This legislation was tossed out due to those on welfare or those who are obese felt targeted. Many smokers feel the same type of prejudice and many have started the process of suing the government for allowing such legislation to be passed.

Black Market

There are countries, where there is (may be not very good) alternative to keep the cigarettes costs reasonable. In Canada, for example, the surprising cost of cigarettes has lead to a rise in crime with many Canadians turning to buying black market, or unstamped, cigarettes. These illegal cigarettes can be dangerous as there’s really no way to tell what’s in them, but many aren’t concerned enough to stop turning to those avenues. In most cases a carton of unstamped cigarettes costs a third of what a consumer would pay at a store. For many, that is too good of an offer to pass up. In the USA, finding cigarettes on the black market is next to impossible. All the previously opened channels for Internet-purchased cheap cigarettes from overseas have been recently blocked by efficient customs operations.


Costs are high, and taxes are unfair to smokers. You still have a way to stop this economic abuse and punishment for smokers. Quit smoking, and you will prevent your government from taking away at least some of your hard-earned money. There is no better way to be a winner in this situation.

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