A New Form of Federal or State-level Cigarette Excise Taxation in the U.S.

Abstract

This paper provides a template for the taxation of cigarettes that not only will yield a rich source of government revenue but also has the potential to improve public health. The tax formulae provided here expressly tax the nicotine and tar content of any brand of cigarette. This acts to discourage the substitution of higher nicotine brands for lower nicotine brands when higher cigarette taxation is imposed.

Corrective Taxes and Cigarette Characteristics

“…In addition, the Family Smoking Prevention and Tobacco Control Act has given the FDA the ‘authority to regulate the levels of tar, nicotine, and other harmful components of tobacco products’. Alternatively, harmful and addictive substances might be taxed rather than regulated (Drayton, ; Harris, ; Evans & Farrelly, ; Cebula, ; Laugesen, ). However, such taxes have rarely been imposed in practice see Irwin & Liroff () for an example.…”