Excise Taxes Raise Smokers’ Happiness

Apr 24, 2002

A recent study by two MIT economists found that, not only are higher taxes good for smokers, they actually make them happy, reports CNN/Money.

“Smokers are made better-off by taxes, as they provide a valuable self-control device,” say MIT economists Jonathan Gruber and Sendhil Mullainathan, in a research paper entitled “Do Cigarette Taxes Make Smokers Happier?” The paper was published recently on the Web site for the National Bureau of Economic Research, which is most well known for setting the dates of economic expansions and recessions in the United States.

“Our results are striking: those who are predicted to be smokers are significantly happier when excise taxes rise,” the economists say. “The fact that this conclusion emerges so clearly in two independent data sets, with different distributions of underlying happiness indicators, is quite striking.” In the United States, for example, the data indicated that each penny of tax reduced smokers’ unhappiness by 0.156 percentage points, and a 50-cent tax rate might make smokers just as happy as non-smokers.

Moderator Comment: Are higher taxes giving Native
American stores and tobacco/cigarette outlets an unfair advantage over convenience
stores and other traditional retailing formats?

Perhaps the real reason behind all this happiness is
that higher taxes have actually saved consumers money by forcing them to find
a less expensive source for purchasing cigarettes and other tobacco products.

A recent piece in the Baltimore Sun by Jay Hancock
profiled Mike Tome, proprietor of CheapSmokesbyMail.com.
Mr. Tome is a member of the Seneca tribe and because his business is on a Native
American reservation, CheapSmokesbyMail.com sells cigarettes free of excise
and sales taxes.

Smokers in Baltimore, according to the Sun article,
can purchase a carton of Marlboros in a store for $37.99. Those same smokers
can buy a carton of Marlboros from CheapSmokesbyMail.com for $27.99, including
shipping. [George
Anderson – Moderator

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