Reducing smoking with tax incentives

In 1998 a packet of cigarettes in the UK cost £3.64 ($5.82), of which £2.88 went to the government in taxes. The same packet of cigarettes cost £1.49 less in France, £1.67 less in Germany and £2.11 less in Spain. On average, a British packet of cigarettes costs about £1.50 more than a packet in any other European country. The average packet in America cost about $2.05 of which 61 cents are taxes, not counting sales and municipal taxes.

1. Because smokers tend to die earlier than nonsmokers, the short-term costs of treating tobacco-related illness are balanced, and probably outweighed, by savings on social security, nursing home stays, and medical care in old age. Every analysis that takes such long-term savings into account, including reports from the US RAND Corporation, the Congressional Research Service, and Harvard economist W. Kip Viscusi, concludes that "social cost" cannot justify raising cigarette taxes.

1. Regulating tobacco

1. Overtax
2. Incentives
3. Disincentive