Suppose there is a bill to increase the tax on cigarettes by $1 per pack coupled with an income tax cut of $500. Suppose a person smokes an average of 500 packs of cigarettes per year-and would thus face a tax increase of about $500 per year from the cigarette tax at the person's current level of consumption. The income tax measure would increase the person's after-tax income by $500. Would the combined measures be likely to have any effect on the person's consumption of cigarettes? Why or why not?

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Julianna Wu

18 March, 18:25

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Jorden Whitehead · Answer 1

It would probably have an effect on the person's consumption of cigarettes because the tax on them is too high