Question

Write a paragraph for the following question. Support your explanation with economic theories.

Should the government tax cigarettes and soda?

Answer 1

Govt should tax cigarettes and soda because both are harmful. Both result in externalities. E. G cigrate smoking must be taxed because not only smokers are harmed but they also harm others particularly in public places. According to benefit principal such smokers should be taxed to cover negative externalities on others. Then according to others smokers etc may not know true impact of consumption and may be misled by addiction. To prevent these things we also need to tax. Others say govt can raise revenue by taxing harmful consumption. Who and oecd have both come forward to support taxation for these kind of things