The quantity of decline in smoking is related directly to the cigarette tax increase

Published on April 21, 2008 3:41 AM

The USA Congress considers that higher cigarette taxes have produced sharp declines in consumption. Anti-tobacco researchers have also shown that the amount of decline in smoking is connected directly to the size of the tax increase.

In many states, after the cigarette tax was raised, the cigarette sales have declined. For example, Connecticut has increased its tax to $1.51 from 50 cents per pack. Since then, the consumption of cigarettes per capita has fallen by 37%, New Jersey raised its tax to $2.40 from 80 cents and smoking has dropped by 35%, another state is California that has raised its cigarette tax to 87 cents per pack but hasn't changed it since and smoking is down by 18% since the tax increase.

Health experts and economists state that by raising the cigarette tax to $1 per pack, the nation could experience one of the biggest one-time declines in smoking.

Frank Chaloupka, University of Illinois economist has studied the effect of taxes on smoking. He predicts that smoking will drop by 6% if the 61-cent-per-pack tax level is passed, taking the tax to $1 from 39 cents a pack.

The State Senate has approved the tax increase last week as a way to pay for expanded government health care for children. President Bush has threatened to prohibit the bill over the increased cost of the health program.

A research has shown that health concerns, tax hikes and higher retail prices all have played a role in the decline. According to the Congressional Budget Office, smoking falls by 2.5% - 5% for every 10% increase in the price of cigarettes.

A higher tax rate is like hitting three birds with one stone - it addresses one of the biggest health problems, attacks the tobacco industry’s profits with a shrinking consumer base and increases the government’s revenue intake - all at the same time.

But Thomas Briant, executive director of the National Association of Tobacco Outlets, thinks that cigarette tax increase could affect the state revenue, and black-market sales and thefts will increase in order to avoid the draconian tax.

The tobacco industry often tells governments that they are going to lose revenues if they increase cigarette taxes because people will buy fewer cigarettes. However it is clear that this is a myth spun to protect the industry because addicted consumers respond slowly to price increases.