Cigarette tax incidence: The poor pay the most.

The Poor Pay Most For Cigarette Taxes

A blog about business and economics.
Sept. 14 2012 11:33 AM

Cigarette Taxes Are Regressive

As a flipside to what I said earlier about the war on smoking, there's also new research out showing that poor people spend the largest share of their income on cigarettes and cigarette taxes.

That's about what you'd expect. It turns out that almost any kind of consumption tax is regressive in its distributional impact (big exceptions are related to vacations and, somewhat oddly, floor coverings) and its exacerbated by the fact that there's not a big "luxury cigarette" segment or anything. As it happens I've just been reading some new research that delves into the overall structure of taxation and it shows that (thanks to he 1986 reform, the creation and expansion of EITC, and the ARRA tax cuts) the tax code on the whole has gotten friendlier to poor people. Cigarette taxes are an important exception.


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