Cigarette Taxes and Smoking Bans - Essay Example

Before the provision of this report, taxes fixed on cigarettes were intended just to raise the revenue on the sale of cigarettes. However, after the provision of the Surgeon General's report, the taxes fixed on cigarettes had an additional purpose of discouraging cigarette smoking (Meier & Licari, 1997). The idea of cigarette tax is obtained from "economic theory". An increase in cigarette tax is a direct cause of increase in the selling cost of per cigarette, and hence, as the law of supply and demand states, a comparatively less amount of cigarettes will be sold.

(Meier & Licari, 1997). A long-stated supposition of the 'economic theory' declared above was that a rise in cigarette tax would reduce its sales and thus hurt the financial system. On the other hand, Jha, Beyer and Heller (1999) reports that the rise in cigarette tax in reality increased the cigarette tax revenue and hence doesn't harm the economy at all. Tax revenue is actually a source of government income. For this reason, an increase in cigarette taxes is an increase in government income.

Cigarette taxes have been increased in thirty one states since 2000 (Capehart, 2004). Further research has shown that these thirty one states have also imposed bans against smoking (Smoke Free World, 2005). Many studies have clearly showed the decrease in the amount of cigarette consumed by the individuals (Brown, 1995; Meier & Licari, 1997; and Showalter, 1998). On the other hand Tax revenues have increased on every sale (Capehart, 2004). Most literature analysis has examined cigarette taxes and cigarette tax revenues without taking the states with smoking bans into consideration.

If we consider both sides of the story, the finalized decision of our research both agrees and disagrees with that of the literature. We agree with Meier & Licari (1997) and Gallet (2004) that smoking has been reduced in those states where cigarette bans and higher cigarette taxes have been imposed and differ with Showalter (1998) that higher cigarette taxes reduces higher tax revenue. The limit to which the literature has bounded itself is still clearly observed if the relation between the effects of the bans on smoking and the tax revenue is analyzed.

It clearly shows that both these are not related to each other particularly. The revenue generated by the tax imposed on cigarettes was compared and contrasted with the amount of taxes that were imposed on cigarettes. But the laws passed for smoking were never compared or contrasted with these factors.The feature of our research expands its influence by analyzing the affect of the taxes imposed by governments in different states. We developed a new way of thought. One may carry out the fact that states, which imposed smoking bans, obtain a decreased amount of sales and hence have a decreased amount of tax revenue.

This fact clearly shows that economy is adversely affected in those states. We proved the theory of demand and supply in relationship to state smoking bans and cigarette tax revenues. We determined if the smoking bans affect cigarette tax