Minnesota Tobacco Tax Increase a Victory for Public Health

This link shows the benefits of taxation on cigarettes in Minnesota. The benefits shown are an increase in State revenue, less young people starting the habit of smoking, more smokers quitting, and a decrease in cancer. The reason why I posted this article is because unintended consequences are a key theme throughout history and especially in economic history as well. What are some unintended consequences of an increase in cigarette taxes that are not displayed in this article? Is an excessive increase in cigarette taxes a form of prohibition? The basic economic theme of this article is that when the price of cigarettes goes up, the quantity demanded goes down.

3 Comments »

  1. klocknec Said,

    October 29, 2013 @ 12:43 am

    I enjoyed this article because it reminds me of the tobacco tax example we used in class. Even though the article says quantity demanded goes down, I wonder if that is the case for people who are addicted to cigarettes. In class we said that the demand curve for tobacco products is inelastic because people are addicted to these products and are willing to pay the higher prices. Even though the tax if trying to stop people from using tobacco, I bet it is causing some people to become poorer since they are unable to stop and are paying the higher price.

  2. Emma Jenkins Said,

    November 5, 2013 @ 2:35 am

    While the Minnesota cigarette tax is reducing the quantity demanded of cigarettes and improving health within the state, it is increasing the quantity demanded of cigarettes in other states. As discussed on pages 100-101 in the textbook, it is easy for cigarette manufacturers to escape state taxes by shipping their product to states with lower taxes. For example, the article mentions that the Missouri cigarette tax is very low; manufacturers can ship less cigarettes to Minnesota and more to Missouri. As a result, smoking is discourage in Minnesota but the quantity demanded of cigarettes increases in Missouri because there is a larger supply and the prices are lower. Therefore, the Minnesota cigarette tax is offset partially by an increase in smoking in other states.

  3. abrahamp Said,

    December 7, 2013 @ 5:31 pm

    This tax would seem like a good idea in principle because of course we want to discourage smoking due to its harmful health effects. But in reality, as other comments have mentioned, manufacturers can ship to other states with lower taxes. In Virginia we have a low cigarette tax so there is a very large smuggling problem with cigarettes. People will buy large amount of cigarettes in Virginia and bring them to different states to sell them at a much higher price. So suppliers are able to get around the cigarette tax and still gouge the consumer.

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