The Tobacco Industry and Taxation

Essay by voyagerCollege, UndergraduateA, July 2009

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The tobacco industry is one industry, which has made a lot of money over the years from consumers. Various taxes have been placed on tobacco products in hopes of decreasing the number of people that smoke. There have been many campaigns, which have been started to try to get smokers to quit smoking. However, the high taxes that are placed on the tobacco products by the government seem to be one of the most common reasons people stop smoking. Will taxing these products be what makes the tobacco industry fail? A majority of our nation has let it be known that they favor the higher prices that have been placed on tobacco products; however, these prices are not harming the sellers as much as the buyers.

The sales of cigarettes have a state and federal taxes placed on them. The sellers of cigarettes try to place most of these costs on the consumers, so they can make as much money as possible.

The consumers still buy the tobacco products, so the have no choice except to pay the high prices that is being charged for these products. A substitute has not been made that is strong enough to replace these products; also, there is not an alternative to nicotine. There are a large number of tobacco product producers, and they have to endure these taxes also, as the consumers pay more each year for the products that are causing them harm.

Since the governments has imposed the higher taxes on tobacco products, the consumers are paying prices that are higher, there is some suffering that as been placed on the tobacco industry. Being able to attract future smokers has become a problem with the higher taxes that have been placed on these products. With the use of the tax to support the healthcare of children, the higher prices have become more wanted by the public. The seventy-five cent increase that has been agreed upon by most of the country will aid in preventing 2.3 million children from starting the smoking habit (Dueffert, 2007). In the United States, the industry is starting to decline; however, the global market is strong in countries that are poorer, which are starting to be some of the biggest users of tobacco products. Asia has more deaths that are related to tobacco use than other countries in the world (Snuffed Out, 2007).

The higher taxes that were placed on tobacco in the U.S. has caused many smokers to stop smoking, this has also caused the number of products being shipped to sellers to decline, and will further decline as the government raises the taxes even higher on tobacco. Each state is also allowed to tax these products, which has caused the price of these products to soar higher than ever before. Because of the nature of these products, a ceiling being placed on the products would be of no use. However, if there were a price floor on the tobacco products, there would be more smokers, which would quit this habit. The brands, which are cheaper, would be affected the most, and since more of the adult smokers use the cheaper brands, the tobacco sales would start to decline (Dueffert, 2007).

More tobacco users would quit if there were a price floor placed on all of the different brands; which would cause the demand for the products to decrease further. The sellers of the cheap brands would have no choice but to match the price of the sellers of the expensive brands. This type of change in price would be more of a burden to lower class people, which are the largest number of people who smoke, and would cause the demand of the products to go down. In turn, the industry would have to rely on the users on a global level. There are some places, which have banned smoking in public, which has also placed a damper on the sales of cigarettes (Snuffed Out, 2007).

The high taxes, which have been placed on tobacco, and the higher cost of health care, have made it harder for the industry to grow. With the industry facing this hurdle, the demand for tobacco products has declined steadily. The demand will continue to decline as the government works with other campaigns to stop smoking. The users of tobacco products will have to make a decision on whether they can afford to buy these product. The nicotine dependency will be a problem for people in the U.S. The users of these products are dependant on the tobacco industry for a nicotine fix, with little regard to price, which is unfortunate.

ReferencesDueffert, N. (2007). Strong majority of voters nationwide favor increase in federal cigarette tax. Campaign for tobacco-free kids. Retrieved May 31, 2009, from http://www.tobaccofreekids.org/Script/DisplayPressRelease.php3?Display=1003Snuffed Out. (2007). The anti-smoking bandwagon rolls on. The Economist. Retrieved May 31 2009, from http://www.economist.com/world/international/displaystory.cfm?story_id=9441366&CFID=19460137&CFTOKEN=11381122