Answer to Question #311903 in Macroeconomics for Hes

Question

11. Why do you think that whenever governments (federal and state) want to increase rev-

enues, they usually propose an increase in taxes on cigarettes and alcohol?

Answer 1

Cigarettes and alcohol cause significant harm, such as lung diseases on human health. Most smokers begin smoking in early life, even before attaining the age of 18 years. The Government uses taxes to eliminate and reduce the number of people who drink alcohol and smoke. Increment of taxes is a strategy used to reduce smoking among low-income earners and teenagers. The cost of these products is increased, and thus the target group will be unable to afford them. Therefore, the number of diseases arising from tobacco and alcohol will go down, and the level of labor supply will increase because there will have energetic people who can work. This will increase the country’s income, and the level of living standards will go high; thus, the Government will have more revenues in return.