An Assessment of the Impact of an Increase in the Tobacco Excise Tax on the U.S. Economy

Noel D. Uri and Roy Boyd

Review of Policy Research, 1995, vol. 14, issue 3‐4, 279-302

Abstract: The analysis in this study examines the effects on the U.S. economy of a proposed $1 per pack equivalent increase in the tobacco products excise tax as a means to partially finance a program of health care reform. The analytical approach used in this study consisted of a general equilibrium model composed of 14 producing sectors, 14 consuming sectors, and six household categories classified by income and a government. Data suggest that as a result of an increase in the excise fax, there will be a decrease in output by all producing sectors of 0.21 percent, a fall in the consumption of goods and services by about 0.49 percent, a decline in total utility by 0.47 percent, and a net increase in government revenue of 1.74 percent. Moreover, as a consequence of this fax increase, tobacco consumption will decline by 12.15 percent. Clearly, an increase in the federal excise tax on tobacco products is a potent policy for curtailing smoking.

Date: 1995
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