Cigarette Tax in America

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Channel Four News Team|
Effects of Cigarette Tax In America|
Cigarette Tax|
Justin Hochstetler, Rachel Krug, Robbie Mostek, Randi Westervelt| 12/5/2011|


Cigarette Consumption
What are the economic impacts of cigarette taxes on producers, consumers, and government in the United States? The motivation of the study is to find out whether cigarette taxes really decrease consumption. If they don’t, what are the possible alternative solutions to decrease consumption? Lastly, we want to find a way to decrease consumption in order to increase productivity and health. The Grossman model of health is a major portion of the health economics field. Michael Grossman formulated his model of health production in 1972 and his model has been used in health economics ever since. Grossman’s model depicts health as both consumable good and an investment good. People consume health through personal satisfaction and economic utility. By investing in health, consumers gain increased satisfaction due to larger productivity, fewer sick days, and higher wages. However, investing in health is costly due to the amount of time and other resources devoted that are necessary to maintain good health. In Grossman’s model, the equilibrium point of health investments come when the marginal cost of health capital equals the marginal benefits of health capital. Furthermore, Grossman’s model shows that once an adequate level of investment in health is reached, reaching an even higher level is difficult regardless of the amount of time and other resources allocated to health investments. The government taxes consumption because it is a negative externality. It is a public good that is normally over consumed so the government regulates those goods to control it. Overall, cigarettes decrease the amount of time spent in full health relating to the Grossman model and is not as productive. The government raises revenue on these taxes and in 2010 it was 16.5 billion dollars. Since we were in elementary school teachers, parents, and role models all told us that smoking was bad; and it is. Nicotine is the addictive drug in tobacco or cigarettes that, “Harms nearly every organ in the body, causing many diseases and reducing a persons’ health overall,” states According to Smoking’s Immediate Effects on the Body from, smoking has immediate impacts on a smoker’s respiratory, circulatory, cardiovascular, gastrointestinal, immune and metabolic systems of the body, as well as the brain. From the first inhale of the tobacco from the cigarette damage is done to the body that can produce serious medical consequences.  A smokers’ brain changes as a result of smoking. Dopamine is released in the brain when a person engages in certain behaviors that gives the person a feeling of reward. Smokers have fewer dopamine receptors from smoking which causes them to smoke more cigarettes to have the same feeling of reward. Smoking tobacco impairs the persons lungs to guard itself against diseases because tobacco paralyzes hairs in the lungs that clear the airway and destroy germs leading to the famous “smokers cough”.  Smoking increases the amount of lipids, a form of fat that provides the body with energy. This fat attaches itself onto the smokers’ blood vessels or arteries causing them to block the flow of blood. This immediately increases the risk of a stroke or heart disease. According to Smoking’s Immediate Effects on the Body smoking 1-5 cigarettes a day is a significant increase in the risk of a heart attack. Smoking also causes an increase in heart rate and blood pressure for the smoker because the body has to work harder to pump blood since the vessels and arteries are blocked by the lipids.  Smoking causes the muscles of the esophagus and stomach to separate which allows acid that normally stays in the stomach to rise up and cause GERD or Gastro esophageal Reflux Disease. This can cause heartburn and may...
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