Cigarette to Small Cigar Substitution

This from USA Today:
“The surging popularity of small cigars, available in fruit and candy flavors, is prompting state and local governments to try to regulate and tax them like cigarettes.

Baltimore announced this month that, beginning in October, it will require single cigars retailing for less than $2.50 each to be sold in packs of five.

Last year, three states — Massachusetts, New Hampshire and Rhode Island — passed bills to tax small cigars at the same rate as cigarettes.

Small cigars, the fastest-growing segment of the tobacco market, are the same size as cigarettes but typically have a brown wrapper that contains tobacco.”

This is just economic agents (people) acting when taxes are imposed on them. Since Cigarettes are being taxed to high heaven people will in turn substitute a similar good. Politicians love to tax cigarettes because they can pretend they are doing it to reduce consumption all the while hitting the most inelastic demand curve. That is the one that is least effected by a price increase. Looks like they were wrong.

The rest is here.


Published in: on January 27, 2009 at 12:40 pm  Comments (1)  
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One CommentLeave a comment

  1. The tax revenues from tobacco are in the billions, yet, the government wants to rid the world of tobacco. Doesn’t sound very kosher, does it?

    The biggest problem for us cigar enthusiasts is that cigars are lumped in with cigarettes when in truth, they are very different animals, indeed.

    God save us us from the Smoke Nazis and their politically correct world of hell.

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