University of Cincinnati Lindner College of Business

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Cigarette Taxes in Ohio

Author(s): Michael Jones

Status: Published
Year: 2016
Publication Name: Business Case Journal
Volume: 24, Issue: 1


Abstract

The case “Cigarette Taxes in Ohio” is a descriptive case that examines the economic issues in the 2015 Ohio budget proposal by Governor Kasich. In 2015, Ohio’s Governor Kasich proposed a budget that would reduce the state’s income tax for both businesses and individual taxpayers. To offset this reduction in income tax collections, Governor Kasich proposed broadening and raising other taxes – including cigarette excise taxes by $1 per pack. Under the tax cut proposal, Governor Kasich would reduce state tax collections by nearly $5.7 billion. However, the offsetting tax increases would be projected at $5.2 billion over the FY2016 and FY2017 budget, resulting in a net tax cut of over $500 million. In addition to political resistance from both Republicans and Democrats, Governor Kasich also faced economic questions. For example, how realistic was his estimate of state tax collections? To what extent would consumers alter their purchasing behavior in response to increased taxes? What would be the long-term health consequences for a reduction in smoking rates?


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