Cigarette Taxes and Smoking Restrictions: Impacts and Policy Implications

The effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities, quota lease rates, and revenues to tobacco-producing areas are analyzed. The price elasticity of demand for U.S. cigarette exports is estimated. Proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption. A policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco-producing areas.