Jacob Manske’s Oct. 3 letter, “Reasons for tax hike on cigarettes” argues GSB’s support of a tax hike on cigarettes lacks a logical foundation. Indeed, he sees the following contradiction: “You can’t really generate revenue if people stop smoking, and you can’t stop people from smoking if you plan on generating more revenue.”

I wish to point out there is no logical contradiction in GSB’s position. Tax revenue from cigarette sales is the product of the tax rate on cigarettes and the quantity of cigarettes purchased. If the tax rate goes up and contemporaneously the amount of cigarettes bought goes down, the product of the two can still go up. Loosely speaking, this is more likely if the tax rate goes up by a lot but cigarette demand falls only slightly. If demand for cigarettes is sufficiently price-inelastic, then tax hikes on cigarettes will raise revenue. The same line of argument can be used to explain why tax cuts may raise overall tax revenue.

Economists study such settings routinely. One just has to take Econ 101 to learn more about such issues.

By the way, I have no opinion on whether the GSB should or should not support tax hikes on cigarettes.

Joydeep Bhattacharya

Associate professor

Economics