Essay On Cigarette Tax

782 Words4 Pages
Taxes are involuntary fees levied on businesses or individuals that are enforced by the government and are primarily for producing revenue and sometimes reducing the demand of a good or service. In this article, the type of tax that is placed on the cigarettes is an indirect tax which is a tax that is levied on a good or service rather than income of profits. China doubled the tax in order to “kill two birds with one stone”. To generate government revenue whilst decreasing the consumption of cigarettes, which as a result reduces negative externalities of consuming that good. Cigarettes are demerit goods; a good that imposes negative externalities of consumption. These damaging effects of demerit goods affect third parties but the effects…show more content…
This decreases consumer spending power which then causes a decrease in producer revenue. This puts pressure on investment and can possibly cause structural unemployment. Therefore, economic growth is inhibited. Another problem that arises due to the doubling of the tax is that the wealth gap is lengthened as this tax is seen as a regressive tax; the proportion of income paid in tax falls as income rises. An alternative solution that the government could implement to reduce the negative externality caused by the consumption of cigarettes is by designating non-smoking areas throughout public areas. If people smoke in these areas they would get fined. However, this would require lots of money and resources to monitor all the public property. As a final alternative, the Chinese Government could subsidize schools and produce negative advertisements to educate children about the consequences of smoking. In light of these arguments, the tax double of cigarettes is seems sufficient if it is combined with another solution. Designating non-smoking areas throughout public areas would require too many resources. Subsidizing schools and producing negative advertisements seems like a great way in reducing the consumption of
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