Increasing the Federal Cigarette Tax: A Means of Reducing Consumption?
April 3, 1998
Lauren Tran & Richard Hegner
This meeting occurred only two days after the Senate Commerce Committee voted 19 to 1 to approve a bill that would raise the federal cigarette tax by $1.10 — an almost sixfold increase. Three economists reviewed the merits of such a tax increase as a tool of public policy, with particular attention to the evidence about the effects of price and tax increases on cigarette consumption — specially that by underage smokers. One suggested that no other public policy intervention could save as many lives as a significant increase in the cigarette tax. A second questioned the propriety of such a tax in light of its apparent regressivity and the lack of similar fiscal penalties on other unhealthy behavior. The meeting also included discussion of the impact of a tax increase on the nation's tobacco-growing and -manufacturing economy as well as a review of the status of the June 20, 1997, settlement between the tobacco industry and 40 state attorneys general.
Kenneth E. Warner, PhD, Professor, University of Michigan School of Public Health; Stephen J. Entin, Executive Director and Chief Economist, Institute for Research on the Economics of Taxation; and Thomas C. Schelling, PhD, Professor, University of Maryland School of Public Affairs
More information available in the accompanying publication, Issue Brief No. 717.