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Reasons for Government Taxation of Cigarettes
Explain why governments tax cigarettes.
Taxes and subsidies
1. Understand the different reasons for cigarette taxation: Before answering the essay question, it is important to have a clear understanding of the different reasons why governments tax cigarettes. These include raising revenue, discouraging consumption, reducing external costs, and improving the current account position. By understanding these reasons, you can structure your essay in a logical and coherent manner.
2. Provide evidence to support your arguments: When discussing the different reasons for cigarette taxation, it is important to provide evidence to support your arguments. For example, when discussing the revenue-raising aspect of cigarette taxation, you could provide examples of government programs that are funded by cigarette taxes. Similarly, when discussing the health problems caused by smoking, you could provide statistics on the number of deaths caused by smoking-related illnesses.
3. Consider the effectiveness of cigarette taxation: In your conclusion, it is important to consider the effectiveness of cigarette taxation. While cigarette taxes can have a significant impact on the economy and society, they may not be effective in reducing smoking rates in the long term. Therefore, it is important to consider other measures that could be implemented alongside cigarette taxation, such as anti-smoking campaigns and education programs. By considering the effectiveness of cigarette taxation, you can provide a well-rounded and nuanced argument in your essay.
STEPS TO WRITE ESSAY 💡MAIN POINTS💡OVERVIEW
A. Background information on cigarette taxation
B. Thesis statement
II. Reason 1: To raise revenue
A. Explanation of price-inelastic demand for cigarettes
B. Discussion of addictive nature of smoking
C. Examples of government spending funded by cigarette taxes
III. Reason 2: To discourage consumption
A. Explanation of demerit goods
B. Discussion of health problems caused by smoking
C. Examples of government anti-smoking campaigns
IV. Reason 3: To reduce external costs
A. Explanation of external costs created by cigarettes
B. Discussion of pollution and health problems for non-smokers
C. Examples of government policies to address external costs
V. Other reasons for cigarette taxation
A. Improving the current account position
B. Discussion of cigarette imports
C. Examples of government policies to address imports
A. Recap of reasons for cigarette taxation
B. Final thoughts on the effectiveness of cigarette taxation.
Governments around the world have implemented various taxes on cigarettes for a multitude of reasons. In this essay, we will explore two of the most common reasons why governments tax cigarettes.
➡️Firstly, governments tax cigarettes to raise revenue.
The demand for cigarettes is price inelastic, meaning that even if the price of cigarettes increases, the demand for them will not decrease significantly. This is because smoking is addictive, and smokers are willing to pay a higher price to satisfy their addiction. Therefore, governments can increase the tax on cigarettes without worrying about a significant decrease in demand. The revenue generated from these taxes can then be used to fund various government programs, such as education, healthcare, and infrastructure.
➡️ Secondly, governments tax cigarettes to discourage consumption.
Cigarettes are considered a demerit good, which means that they have negative externalities. Smoking causes health problems not only for the smoker but also for those around them. The harm caused by smoking is often underestimated by smokers, and they may not take into account the external costs they impose on others. By increasing the tax on cigarettes, governments can discourage consumption and reduce the negative externalities associated with smoking. This can lead to a healthier population and a reduction in healthcare costs.
➡️ Furthermore, cigarettes create external costs by causing pollution and health problems for non smokers.
The cost of these externalities is often borne by third parties, such as the government or society as a whole. By taxing cigarettes, governments can reduce the external costs associated with smoking and ensure that smokers pay for the harm they cause.
➡️ In addition, taxing cigarettes can also improve a country's current account position.
Cigarettes are often imported, and the tax revenue generated from them can help reduce the trade deficit. This can lead to a more stable economy and a reduction in the country's reliance on imports.
In conclusion, governments tax cigarettes for various reasons, including raising revenue, discouraging consumption, reducing external costs, and improving the current account position. These taxes can have a significant impact on the economy and society as a whole, leading to a healthier population, reduced healthcare costs, and a more stable economy.