This paper assesses the appropriate cigarette tax needed to address potential market failures. There is no evidence of inadequate risk decisions by smokers regarding their own welfare. Detailed calculations of the financial externalities of smoking indicate that the financial savings from...

Cigarette taxes are often the highest excise taxes in terms of their percentage share of the product price. The extent of the excess burden imposed by the tax will increase with the elasticity of demand, which is usually estimated to be between -0.4 and -1.0. Potential rationales for raising the...

This paper assesses the appropriate cigarette tax needed to address potential market failures. There is no evidence of inadequate risk decisions by smokers regarding their own welfare. Detailed calculations of the financial externalities of smoking indicate that the financial savings from...