How High Should Cigarette Taxes Go?

January 24, 2006

New York City Major Michael Bloomberg wants to make the nation’s highest cigarette tax even higher. From the New York Daily News:

New York City’s tax on cigarettes – already the highest in the nation – should be upped another 50 cents per pack, with the revenue going to public health efforts to stop smoking, Mayor Bloomberg proposed yesterday.

The hike would raise the combined city and state tax on cigarettes to $3.50 per pack, which would bring the price of a pack of smokes in some parts of the city to a staggering $8.

The proposal needs approval by the City Council and the state Legislature. (Full Story)

Cigarette taxes are often justified because of the negative externalities they impose on society, including the additional health care costs that many governments face. However, as most studies have suggested, these costs are often overstated and the current level of taxation far exceeds any legitimate compensation for these social costs.

Rather than concerns about public finance, the drive toward higher cigarette taxes is primarily driven by lawmakers’ attempts to penalize lifestyle decisions that they personally view as inappropriate. This dangerous trend toward using tax policy to influence social behavior—rather than simply to raise revenue for programs—has become more popular in recent years.

Judging from recent calls for special excise taxes on candy, soft drinks, and some fast foods in response to rising obesity, the trend doesn’t seem to be slowing. Ironically, these calls for rising cigarette taxes may actually be related to the growing problem of obesity.


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