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Effects of an Increase in the Federal Excise Tax on Cigarettes

Author

Listed:
  • Daniel A. Sumner
  • Michael K. Wohlgenant

Abstract

The economic impact of a cigarette tax increase on the cigarette and tobacco industries depends on market forces and on the U.S. tobacco program. This study uses a log-linear equilibrium displacement model, parameter estimates from prior studies, and recent data to indicate quantitative effects. International trade implies that the effect of the tax increase on the price of domestic tobacco will be small, even in the case of fixed tobacco quotas. However, the effects on tobacco producers' revenue, quota lease rates, and producer economic rents can be significant, depending on the response of U.S. tobacco policy to a tax change.

Suggested Citation

  • Daniel A. Sumner & Michael K. Wohlgenant, 1985. "Effects of an Increase in the Federal Excise Tax on Cigarettes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 235-242.
    • Handle: RePEc:oup:ajagec:v:67:y:1985:i:2:p:235-242.
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    File URL: http://hdl.handle.net/10.2307/1240674
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    Citations

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    Cited by:

    1. Raper, Kellie Curry & Love, H. Alan, 1999. "MONOPSONY POWER IN MULTIPLE INPUT MARKETS: A Nonparametric Approach," Staff Paper Series 11656, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Zhen Miao & John C. Beghin & Helen H. Jensen, 2012. "Taxing Sweets: Sweetener Input Tax Or Final Consumption Tax?," Contemporary Economic Policy, Western Economic Association International, vol. 30(3), pages 344-361, July.
    3. Kelly Tiller & Shiferaw Feleke & Jane Starnes, 2013. "Federal excise tax increase and its effects on U.S. tobacco production," Empirical Economics, Springer, vol. 44(2), pages 701-717, April.
    4. Yu, Kihwan & Kim, Kwansoo, 2020. "Estimating the Effects of HMR Consumption Increase on Food Industry in Korea: A Stochastic Multi-sector and Multi-market Equilibrium Displacement Modelling Approach," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304488, Agricultural and Applied Economics Association.
    5. Cai, Hailong & Kinnucan, Henry W., 2009. "The Compensative Effects of Tobacco Leaf Price Changes on Tax Revenue in China," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46727, Southern Agricultural Economics Association.
    6. Ali, Mubarik & Ahmed, Faryal & Channa, Hira & Davies, Stephen, 2016. "Pakistan’s fertilizer sector: Structure, policies, performance, and impacts:," IFPRI discussion papers 1516, International Food Policy Research Institute (IFPRI).
    7. Benny Overton & John Beghin & William Foster, 2017. "Phytosanitary Regulation and Agricultural Flows: Tobacco Inputs and Cigarettes Outputs," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 19, pages 327-337, World Scientific Publishing Co. Pte. Ltd..
    8. James C. Cox & Mark Rider & Astha Sen, 2012. "Tax Incidence: Do Institutions Matter? An Experimental Study," Experimental Economics Center Working Paper Series 2012-17, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Feb 2017.
    9. Harrington, David H. & Dubman, Robert, 2008. "Equilibrium Displacement Mathematical Programming Models: Methodology and Model of the U.S. Agricultural Sector," Technical Bulletins 184313, United States Department of Agriculture, Economic Research Service.
    10. Ali, Mubarik & Ahmed, Faryal & Channa, Hira & Davies, Stephen, 2015. "The Role of Regulations in the Fertilizer Sector of Pakistan," 2015 Conference, August 9-14, 2015, Milan, Italy 211559, International Association of Agricultural Economists.
    11. Kellie Curry Raper & H. Alan Love & C. Richard Shumway, 2000. "Determining market power exertion between buyers and sellers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 225-252.
    12. Lana Awada & Peter W. B. Phillips, 2021. "The distribution of returns from land efficiency improvement in multistage production systems," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(1), pages 73-92, March.
    13. A. Malek Hammami & John C. Beghin, 2021. "The trade and welfare impacts of the U.S. retaliatory tariff on EU olive oil," Agricultural Economics, International Association of Agricultural Economists, vol. 52(5), pages 807-818, September.
    14. Ahn, Byeong-il & Im, Jeong-bin, 2016. "An equilibrium displacement approach to analyzing the effects of tariff reduction on farmers' profits: The Korea-Chile FTA's effects on Korean grape producers," Economics Discussion Papers 2016-10, Kiel Institute for the World Economy (IfW Kiel).
    15. Overton, Benny E. & Beghin, John C. & Foster, William E., 1995. "Phytosanitary Regulation and Agricultural Trade Flows: Tobacco Inputs and Cigarettes Outputs," Staff General Research Papers Archive 1590, Iowa State University, Department of Economics.
    16. Metcalfe, Mark R., 2000. "Environmental Regulation And Implications For U.S. Pork Exports," 2000 Annual meeting, July 30-August 2, Tampa, FL 21808, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Anthony N. Rezitis & A. Blake Brown, 1999. "Pass‐through of exchange rates and tariffs in Greek‐US tobacco trade," Agricultural Economics, International Association of Agricultural Economists, vol. 21(3), pages 269-277, December.
    18. Peyton Ferrier & Chen Zhen, 2014. "The producer welfare effects of trade liberalization when goods are perishable and habit-forming: the case of asparagus," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 129-141, March.

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