Journal of Economic Perspectives: Vol. 7 No. 4 (Fall 1993)


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Policy Watch: Alcohol and Cigarette Taxes

Article Citation

Grossman, Michael, Jody L. Sindelar, John Mullahy, and Richard Anderson. 1993. "Policy Watch: Alcohol and Cigarette Taxes." Journal of Economic Perspectives, 7(4): 211-222.

DOI: 10.1257/jep.7.4.211


Increased excise taxes on cigarettes and alcohol have been suggested as a means to finance (at least partially) the Clinton administration's proposed program of health care reform. We consider the revenue potential of cigarette and alcohol tax hikes and explore the effects on consumption and related outcomes. We present estimates of the social costs and implied optimal tax rates on cigarettes and alcohol. The bulk of the evidence presented here does support higher taxes on cigarettes and alcohol.

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Grossman, Michael (CUNY and NBER)
Sindelar, Jody L. (Yale School of Medicine)
Mullahy, John (Trinity College, NBER, and Resources for the Future)
Anderson, Richard (State U of New York)

JEL Classifications

H25: Business Taxes and Subsidies including sales and value-added (VAT
L66: Food; Beverages; Cosmetics; Tobacco; Wine and Spirits


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