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Estimating the Corrective Tax for Goods whose Consumption Affects the Consumer’s Health

Donald L. Alexander () and Jon R. Neill
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Donald L. Alexander: Western Michigan University
Jon R. Neill: Western Michigan University

Atlantic Economic Journal, 2017, vol. 45, issue 1, 103-117

Abstract: Abstract Taxing goods whose consumption has an adverse impact on the consumer’s health appears to be gaining support. But the social benefit from taxes on these goods is debatable. This paper considers what the corrective tax on such a good is and applies this theory to one good whose health effects are well established. More specifically, we produce a formula for computing the corrective tax on a good whose consumption may adversely affect the health of the consumer, and then use this formula to calculate the corrective tax for one such good, cigarettes.

Keywords: External costs; Risk pooling; Optimal tax; Smoking behavior; D62; I13; H21 (search for similar items in EconPapers)
Date: 2017
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