The controversial issues related to Taxation

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Taxation has always been a controversial issue between the government and taxpayers. Taxes are considered some of the most effective tools in government's arsenal used for economic regulation. Taxes both affect economic balance and some social phenomena. Excise taxes are known for their strong limiting effect on alcohol and tobacco consumption. For instance, there is a cigarette tax increase in the state of New York recently ("New York State Excise Tax on Cigarettes to Increase on July 1, 2010," 2010, p.101). This issue can be seen as vivid demonstration which is debatable and shows how financial measures will be. The tax was increased from $2.75 to $4.35 bringing the price of an average pack of cigarettes up to $12 ("New York State Excise Tax," 2010, p.101). Although there might be some advantages of excise hike, increasing tax on cigarette should be nullified for several reasons: the states should properly use funds on tobacco prevention programs, the number of smokers will change and this tax hike is regressive.

First, the states fund less on smoking ceasing programs than they at least are supposed to do by The Centers for Disease Control and Prevention (CDC) recommended level ("A Broken Promise to Our Children," 2009, p.132). A problem is that states receive certain amount of money from tobacco settlements every year for promoting tobacco prevention programs ("A Broken Promise," 2009, p.134). The CDC proposes a few levels which determine whether states spending on programs appropriately to help smokers quit and according to this, there is only one state among entire states in the United States, North Dakota, following its policy ("A Broken Promise," 2009, p.135). Moreover, more than half of the states that have cut down funds on tobacco prevention rather than taking precautions against use of tobacco by spending money on it ("A Broken Promise," 2009, p.135-136). Particularly, the largest funding cut was made by the state of New York ("A Broken Promise," 2009, p.136). With the large amount of money they receive, the states would better fund such programs helping people from smoking habit. Yet, the fact is that currently many states do not meet levels CDC recommends for funding on tobacco prevention programs because they use a small portion of money. Hence, the states should spend money on helping smokers to quit from tobacco as accurate as CDC recommended level.

Furthermore, there will be no significant change of reduction in proportion of smokers (). Cigarettes represent a group of products the demand, which is only partially determined by addiction. It is naturally that smoking is a prime target for taxation, because it is an addictive activity. Those who smoke regard the habit as a necessity, and the demand for cigarettes becomes inelastic. Unless the price increases to some astronomical level, smokers will continue to consume cigarettes. Hence, raising the price will not necessarily influence demand, and consequently makes it a good that the government can safely tax without interfering with the market. Nevertheless, the research from Carpenter and Cook, smokers seem to be sensitive to cigarette price changes. As well, Centers for Disease Control and Prevention (2009) examines that frequency of trend in smoking in various ways such as sex, ethnicity, age or education level shows much change from 2007 to 2008 (p.129).

Last, regarding the regressivity of excise taxes, it is possible to assume that lower income groups are going to be impacted stronger than smokers with higher income. This shows inequality in society and this issue is particularly important in context of current recession. The federal government struggles to spur consumption, as it makes up 70% of the U.S. economy. On the other hand, Remler (2003) states that NY tax increases significantly lowers final disposable income of smokers, and therefore undermines potential for economic growth in a region (p.140).

Indeed, higher prices of cigarettes may reduce smoking attractiveness among youth. As claimed by Carpenter and Cook, teens smokers tend to be responsive to the price of cigarettes because if tax on cigarettes goes up, the price will be raised up too. Then the youth smokers might less buy the cigarettes. Besides, Remler (2004) cites some supporters of tax hike who think cigarette taxes are progressive so that this could be applied by different groups of people such as rich and poor people (p.142).

However, the problem is that the states collect taxes from the citizens in addition to receiving the billions of dollars from tobacco settlement and they do not use it appropriately ("A Broken Promise," 2009, p.134). The states would better balance for spending money which means they should not only use money for better economy of the states or cities. They should fund tobacco prevention programs as well to prevent smokers from harmful health.

In addition, the smoker, who is forced to cut down on the habit, experiences the feeling of deprivation. Even if higher prices encourage him or her to quit smoking, there will be people who keep buying cigarettes. According to the Senator of New York, higher tax on cigarettes may influence on younger smokers to stop doing it but older smokers are not influenced by the price of cigarettes because they are already addicted to smoking (Al-Muslim, 2010, p.100). There are going to be people, for whom tax increase is not going to be sufficient incentive to cease smoking, and they are going to be financially discriminated on the basis of their consumption preferences (Dembosky, 2008, p.111).

Last, increasing tax on cigarettes is regressive. According to Remler (2004), poor people buy more cigarettes than the rich due to the fact that smoking frequency is higher among poor people (p.140). Plus, progressive tax will lead an inequality in society among rich and poor people because the rich pay more on taxes while the poor do not (Remler, 2004, p.143). There will be the gap between the rich and poor in the standard of living. XXX states that the Department of Health and Human Services and the Heritage Foundation data show that the greater number of smokers have incomes below 200 percent of the federal poverty level. This study also emphasizes that 22.4 million new smokers will be needed by 2017 to fund SCHIP at the proposed level. In addition, a new research from the Tax Foundation shows that the proposed federal tax would take more from poorer families than any other proposed tax to raise SCHIP funds.

In conclusion, the recent cigarette tax increase in New York demonstrates that the government can go beyond social and economic reasoning in attempt to achieve desired result. Higher tax on cigarettes should be invalidated. The states do not spend money on such programs that helping smokers to quit essentially even though they get the larger amount of money from tobacco taxes. In addition, smoking is addictive and smokers will continue to consume cigarettes. Plus, tax hike is regressive so there will be the gap between the rich and poor standards of living. Therefore, the State of New York should not increase tax on cigarettes.