Sin taxes research paper

Expanding early childhood education — in particular for low- and moderate-income children — as the President has proposed is a very progressive use of the revenue from raising the tobacco tax. These three factors can help mitigate the reduced enjoyment from smoking that some low-income people facing an increased tobacco tax might experience. It is also worth noting that on average low-income smokers tend to respond to tobacco tax increases by reducing their consumption of cigarettes, rather than by spending more on cigarettes and reducing their consumption of other goods.

One study found that, on average, the lowest-income quintile reduces cigarette consumption by 1 percent for every 1 percent price increase.

Who Smokes in Developing Countries? Implications for a Tobacco Tax | Center For Global Development

Obviously, not all members of the group respond in the same way. But to the extent that a person curbs his or her consumption or stops smoking altogether, his or her cash burden is smaller than it would be if he or she continued to smoke at the same level after the tax is imposed. The ultimate goal of raising cigarette taxes is to improve public health and extend lives. If tobacco revenues decline over time because fewer people are smoking, this would indicate that the policy is working. Some have used the likely decline in tobacco revenues to argue against using them to finance preschool education.

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Tobacco revenues are expected to continue falling beyond the budget window. This, too, would represent a policy success and a public health gain. Policymakers can revisit the financing mechanisms toward the end of the ten-year period. They could elect to raise the tobacco tax further at that time particularly given that incomes will likely be higher and, therefore, the cost of cigarettes per hour of work lower. Or, policymakers may prefer to add another financing source.

But they should not let the projected decline in tobacco revenues tip the balance against a policy that will improve public health and extend lives, while helping to finance an important national need and thereby make a sound investment in the future workforce. Chaloupka, Ayda Yurekli, and Geoffrey T. Its analysis did not model health and budgetary effects from smokers consuming fewer cigarettes.


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Incorporating population growth projections, 16 percent of all adults in corresponds to 43 million adult smokers. Armour, Eric A. Jonathan Gruber, January pp. Farrelly et al. Even low levels of tobacco exposure, including occasional smoking or secondhand smoke, increase the risk of poor cardiac health.

Don't sugar-coat sin taxes

Generally, the state turns to sin taxes during times of budget crisis; the Legislature also may impose sin taxes for specific funding purposes. Texas has taxed liquor and cigarettes since the Great Depression. Pari-mutuel betting in Texas has come and gone over the years; it was legal from to , again from to and finally from to the present.

The Texas Lottery sold its first tickets in Exhibit 3. Texas Comptroller of Public Accounts and U. Alcohol and Tobacco Tax and Trade Bureau. Texas levies two types of tobacco taxes — one on cigarettes and another on cigars and other tobacco products e. The Texas Legislature created the first Texas tobacco tax, enacting a 3-cent levy on each pack of 20 cigarettes. Between and , this rate increased nine times, reaching 41 cents per pack, where it remained until Originally, cigars and some other tobacco products were taxed under the cigarette tax law.

In , the Legislature created a separate tax for cigars and other tobacco products, taxing cigars by volume and other tobacco products by factory price. Snuff was added to the tax in In , further legislation changed the basis of the tax on other tobacco products to weight. Texas began taxing alcoholic beverages in , and currently has six separate alcohol taxes. Four are excise taxes on liquor, beer, wine and malt liquor Exhibit 4. These taxes are remitted at the wholesale level by distributors.

Two other taxes, on mixed beverage gross receipts and mixed beverage sales, are imposed on all alcoholic beverages sold to consumers by restaurants and bars permitted to serve liquor. The mixed beverage gross receipts tax was levied at a rate of 14 percent before , when the mixed beverage sales tax was introduced. In fiscal , the gross receipts tax was reduced to 6. Incidentally, the alcoholic beverage taxes as a group were the only type of Texas tax that weathered the Great Recession without declining.

The Legislature repealed another alcohol tax, levied on alcoholic beverages sold to train and airline passengers, as of Sept. In , Texas voters approved a statewide referendum allowing pari-mutuel wagering on horse and greyhound races. At present, the state has four active horse racing tracks and three greyhound tracks that are inactive but offering betting on races simulcast from other states Exhibit 5. The popularity of pari-mutuel racing has declined considerably in recent years, however, and the total represents less than a third of what the state realized in Racing industry proponents claim this feature could generate hundreds of millions in additional revenue for the state.

The cities have done a pretty good job, for the most part. I would say cities, luckily, have been in the range of reasonable taxes so far, given the hazy nature of the estimates we have. A big focus of your research is on the good that is potentially done by these taxes that goes back to the community. Knowledge Wharton: The impact of higher prices and taxes on cigarettes to mitigate cancer and other diseases has been discussed for years.

Part of this has to do with the attraction that people have to consuming these kind of products, correct?

One of the other questions about soda is the extent to which soda consumption is addictive in the same way that cigarette consumption is. For soda, the question is whether people who are high soda consumers continue to consume soda at the same rates, like cigarette smokers — or whether they actually switch to other beverages or reduce consumption overall.

Those kinds of policies, too, can make more sense when you have these goods that are consumed more by poorer consumers. They can help dissuade people from consuming this stuff without actually taking money out of their pockets, right? The idea is that less marketing would cause poorer consumers to drink less soda, without necessarily having to pay more for the soda they are drinking. Knowledge Wharton: Is there bias in this process in general?

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And that corrective benefit has to be weighed against the regressivity cost. Knowledge Wharton: Going back to the soda issue, what really has been the impact from the tax? That was an important piece to this.

But one of the interesting questions going into this was to what extent the soda tax — which is actually imposed on the distributors who supply sodas to grocery stores — would be passed on to consumers in the form of higher soda prices. On the one hand, sometimes people are dismayed to see taxes being passed through to consumers.


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  5. In this case, having that tax passed through to the consumer and being front-and-center on the receipt might be consistent with the apparent goals of the policy. It could be a very important deterrent in this process. But if they stay there, and the tax ends up being fully passed on to consumers on into the future, I think it will be interesting to see if that actually helps with these benefits.

    Maybe this is the kind of thing that we should have been doing with cigarettes all along, really emphasizing how much the cost is increasing because of these taxes. Knowledge Wharton: How much interest in this research topic is there from the medical community? Lockwood: I think the medical research community has a big part to play in this. Although this is mostly a theory paper, it identifies the key parameters or estimates that will govern what that optimal tax is.

    A lot of that research can beneficially come from the medical community. Things like, how much more does medical care cost when people consume more sugar versus less? How much do people seem to be taking those costs into account when they are making their consumption decisions? Those are exactly the kinds of things that people are studying right now. And as I said, we have some initial estimates.

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    But I think this is an exciting time both for economists and medical researchers because we will have better estimates of this shortly. We want to understand the economic impact of our behaviors right now, whether they are positive or negative. Lockwood: Exactly. This area of behavioral economics allows for what many of us feel: That there are a lot of things going on.