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INDIAN TAXSTRUCTURE


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A tax may be defined as a "pecuniary burden laid upon individuals or propertyowners to support the government [...] a payment exacted by legislativeauthority."[1]A tax "is not a voluntary payment or donation, but an enforcedcontribution, exacted pursuant to legislative authority" and is "any contributionimposed by government [...] whether under the name of toll, tribute, tallage,gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.

To tax (from the Latin taxo; "I estimate") is to impose a financial charge or otherlevy upon a taxpayer (an individual or legal entity) by a state or the functionalequivalent of a state such that failure to pay is punishable by law. Taxes are alsoimposed by many administrative divisions. Taxes consist of direct tax or indirecttax, and may be paid in money or as its labour equivalent (often but not alwaysunpaid labour).

Overview

The legal definition and the economic definition of taxes differ in that economistsdo not consider many transfers to governments to be taxes. For example, sometransfers to the public sector are comparable to prices. Examples include tuitionat public universities and fees for utilities provided by local governments.Governments also obtain resources by creating money (e.g., printing bills andminting coins), through voluntary gifts (e.g., contributions to public universitiesand museums), by imposing penalties (e.g., traffic fines), by borrowing, and byconfiscating wealth. From the view of economists, a tax is a non-penal, yetcompulsory transfer of resources from the private to the Public sector levied on abasis of predetermined criteria and without reference to specific benefit received.

In modern taxation systems, taxes are levied in money; but, in-kind and corve taxation are characteristic of traditional or pre-capitalist statesand their functional equivalents. The method of taxation and the governmentexpenditure of taxes raised is often highly debated in politics andeconomics. Taxcollection is performed by a government agency such as Canada RevenueAgency, the Internal Revenue Service (IRS) in theUnited States, or Her Majesty'sRevenue and Customs (HMRC) in the United Kingdom. When taxes are not fullypaid, civil penalties (such asfines or forfeiture) or criminal penalties (such

as incarceration)

[2]

may be imposed on the non-paying entity or individual.

Purposes and effects

Money provided by taxation has been used by states and their functionalequivalents throughout history to carry out many functions. Some of these
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include expenditures on war, the enforcement of lawand public order, protectionof property, economic infrastructure (roads, legal tender, enforcement ofcontracts, etc.), public works, social engineering, and the operation ofgovernment itself. Governments also use taxes to fund welfare and publicservices. A portion of taxes also go to pay off the state's debt and the interest this

debt accumulates. These services can include education systems, health caresystems, pensions for the elderly, unemployment benefits, and publictransportation. Energy, water and waste management systems are alsocommon public utilities. Colonial and modernizing states have also used cashtaxes to draw or force reluctant subsistence producers into cash economies.

Governments use different kinds of taxes and vary the tax rates. This is done todistribute the tax burden among individuals or classes of the population involvedin taxable activities, such as business, or to redistribute resources betweenindividuals or classes in the population. Historically, the nobility were supportedby taxes on the poor; modern social security systems are intended to support the

poor, the disabled, or the retired by taxes on those who are still working. Inaddition, taxes are applied to fund foreign aid and military ventures, to influencethe macroeconomic performance of the economy (the government's strategy fordoing this is called its fiscal policy; see also tax exemption), or to modify patternsof consumption or employment within an economy, by making some classes oftransaction more or less attractive.

A nation's tax system is often a reflection of its communal values or/and thevalues of those in power. To create a system of taxation, a nation must makechoices regarding the distribution of the tax burdenwho will pay taxes and how

much they will pay

and how the taxes collected will be spent. In democraticnations where the public elects those in charge of establishing the tax system,these choices reflect the type of community that the public wishes to create. Incountries where the public does not have a significant amount of influence overthe system of taxation, that system may be more of a reflection on the values ofthose in power.

Proportional, progressive, regressive, and lump-sum

An important feature of tax systems is the percentage of the tax burden as itrelates to income or consumption. The terms progressive, regressive, andproportional are used to describe the way the rate progresses from low to high,from high to low, or proportionally. The terms describe a distribution effect, whichcan be applied to any type of tax system (income or consumption) that meets thedefinition.
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A progressive tax is a tax imposed so that the effective tax rate increases asthe amount to which the rate is applied increases.

The opposite of a progressive tax is a regressive tax, where the effective taxrate decreases as the amount to which the rate is applied increases. Thiseffect is commonly produced where means testing is used to withdraw tax

allowances or state benefits. In between is a proportional tax, where the effective tax rate is fixed, while the

amount to which the rate is applied increases.

A lump-sum tax is a tax that is a fixed amount, no matter the change incircumstance of the taxed entity.

The terms can also be used to apply meaning to the taxation of selectconsumption, such as a tax on luxury goods and the exemption of basicnecessities may be described as having progressive effects as it increases a taxburden on high end consumption and decreases a tax burden on low endconsumption.

Direct and indirect

Main articles: Direct tax and Indirect tax

Taxes are sometimes referred to as "direct taxes" or "indirect taxes". Themeaning of these terms can vary in different contexts, which can sometimes leadto confusion. An economic definition, by Atkinson, states that "...direct taxes maybe adjusted to the individual characteristics of the taxpayer, whereas indirecttaxes are levied on transactions irrespective of the circumstances of buyer or

seller."[6]

According to this definition, for example, income tax is "direct", andsales tax is "indirect". In law, the terms may have different meanings. In U.S.constitutional law, for instance, direct taxes refer to poll taxes and property taxes,which are based on simple existence or ownership. Indirect taxes are imposedon events, rights, privileges, and activities.[7]Thus, a tax on the sale of propertywould be considered an indirect tax, whereas the tax on simply owning theproperty itself would be a direct tax.

Kinds of taxes

The Organisation for Economic Co-operation and Development (OECD)

publishes an analysis of tax systems of member countries. As part of suchanalysis, OECD developed a definition and system of classification of internaltaxes,[8]generally followed below. In addition, many countries impose taxes(tariffs) on the import of goods.
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Taxes on income

Income tax

Many jurisdictions tax the income of individuals and business entities, includingcorporations. Generally the tax is imposed on net profits from business, netgains, and other income. Computation of income subject to tax may bedetermined under accounting principles used in the jurisdiction, which may bemodified or replaced by tax law principles in the jurisdiction. The incidence oftaxation varies by system, and some systems may be viewedas progressive or regressive. Rates of tax may vary or be constant (flat) byincome level. Many systems allow individuals certain personal allowances andother nonbusiness reductions to taxable income.

Personal income tax is often collected on a pay-as-you-earn basis, with smallcorrections made soon after the end of the tax year. These corrections take oneof two forms: payments to the government, for taxpayers who have not paidenough during the tax year; and tax refunds from the government for those whohave overpaid. Income tax systems will often have deductions available thatlessen the total tax liability by reducing total taxable income. They may allowlosses from one type of income to be counted against another. For example, aloss on the stock market may be deducted against taxes paid on wages. Othertax systems may isolate the loss, such that business losses can only bededucted against business tax by carrying forward the loss to later tax years.

Capital gains tax

Most jurisdictions imposing an income tax treat capital gains as part of incomesubject to tax. Capital gain is generally gain on sale of capital assets, i.e., thoseassets not held for sale in the ordinary course of business. Capital assets includepersonal assets in many jurisdictions. Some jurisdictions provide preferentialrates of tax or only partial taxation for capital gains. Some jurisdictions imposedifferent rates or levels of capital gains taxation based on the length of time theasset was held.

Corporate tax

Corporate tax refers to income, capital, net worth, or other taxes imposed oncorporations. Rates of tax and the taxable base for corporations may differ fromthose for individuals or other taxable persons.
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Social security contributions

Many countries provide publicly funded retirement or health care systems.[9]Inconnection with these systems, the country typically requires employers and/oremployees to make compulsory payments.[10]These payments are oftencomputed by reference to wages or earnings from self employment. Tax ratesare generally fixed, but a different rate may be imposed on employers than onemployees.[11]Some systems provide an upper limit on earnings subject to thetax. A few systems provide that the tax is payable only on wages above aparticular amount. Such upper or lower limits may apply for retirement but nothealth care components of the tax.

Taxes on payroll or workforce

Unemployment and similar taxes are often imposed on employers based on totalpayroll. These taxes may be imposed in both the country and sub-country levels.

Taxes on property

Recurrent [property taxes] may be imposed on immovable property (realproperty) and some classes of movable property. In addition, recurrent taxes maybe imposed on net wealth of individuals or corporations.[13]Many jurisdictionsimpose estate tax, gift tax or other inheritance taxes on property at death or gifttransfer. Some jurisdictions impose taxes on financial or capital transactions.

Property taxA property tax (or millage tax) is an ad valorem tax levy on the value of propertythat the owner of the property is required to pay to a government in which theproperty is situated. Multiple jurisdictions may tax the same property. There arethree general varieties of property: land, improvements to land (immovable man-made things, e.g. buildings) and personal property (movable things). Real estateor realty is the combination of land and improvements to land.

Property taxes are usually charged on a recurrent basis (e.g., yearly). A commontype of property tax is an annual charge on the ownership of real estate, where

the tax base is the estimated value of the property. For a period of over 150years from 1695 a window tax was levied in England, with the result that one canstill see listed buildings with windows bricked up in order to save their ownersmoney. A similar tax on hearths existed in France and elsewhere, with similarresults. The two most common type of event driven property taxes are stampduty, charged upon change of ownership, and inheritance tax, which is imposedin many countries on the estates of the deceased.
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In contrast with a tax on real estate (land and buildings), a land value tax is leviedonly on the unimproved value of the land ("land" in this instance may mean eitherthe economic term, i.e., all natural resources, or the natural resources associatedwith specific areas of the Earth's surface: "lots" or "land parcels"). Proponents ofland value tax argue that it is economically justified, as it will not deter production,

distort market mechanisms or otherwise create deadweight losses the way othertaxes do.

When real estate is held by a higher government unit or some other entity notsubject to taxation by the local government, the taxing authority may receivea payment in lieu of taxes to compensate it for some or all of the foregone taxrevenue.

In many jurisdictions (including many American states), there is a general taxlevied periodically on residents who own personal property (personalty) within the

jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax. The

tax is often designed with blanket coverage and large exceptions for things likefood and clothing. Household goods are often exempt when kept or used withinthe household.[15]Any otherwise non-exempt object can lose its exemption ifregularly kept outside the household.[15]Thus, tax collectors often monitornewspaper articles for stories about wealthy people who have lent art tomuseums for public display, because the artworks have then become subject topersonal property tax.[15]If an artwork had to be sent to another state for sometouch-ups, it may have become subject to personal property tax in that state aswell.

Inheritance tax

Inheritance tax, estate tax, and death tax or duty are the names given to varioustaxes which arise on the death of an individual. In United States tax law, there isa distinction between an estate tax and an inheritance tax: the former taxes thepersonal representatives of the deceased, while the latter taxes the beneficiariesof the estate. However, this distinction does not apply in other jurisdictions; forexample, if using this terminology UK inheritance tax would be an estate tax.

Expatriation tax:

An Expatriation Tax is a tax on individuals who renounce their citizenship orresidence. The tax is often imposed based on a deemed disposition of all theindividual's property. One example is theUnited States under the American JobsCreation Act, where any individual who has a net worth of $2 million or anaverage income-tax liability of $127,000 who renounces his or her citizenshipand leaves the country is automatically assumed to have done so for taxavoidance reasons and is subject to a higher tax rate.[16]
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Transfer tax

Historically, in many countries, a contract needed to have a stamp affixed tomake it valid. The charge for the stamp was either a fixed amount or a

percentage of the value of the transaction. In most countries the stamp has beenabolished but stamp duty remains. Stamp duty is levied in the UK on thepurchase of shares and securities, the issue of bearer instruments, and certainpartnership transactions. Its modern derivatives, stamp duty reservetax and stamp duty land tax, are respectively charged on transactions involvingsecurities and land. Stamp duty has the effect of discouraging speculativepurchases of assets by decreasing liquidity. In the United States transfer tax isoften charged by the state or local government and (in the case of real propertytransfers) can be tied to the recording of the deed or other transfer documents.

Wealth (net worth) tax

Some countries' governments will require declaration of the tax payers' balancesheet (assets and liabilities), and from that exact a tax on net worth (assetsminus liabilities), as a percentage of the net worth, or a percentage of the networth exceeding a certain level. The tax may be levied on "natural" or legal"persons". An example is France's ISF.

Taxes on goods and services

Value added tax (Goods and Services Tax)

A value added tax (VAT), also known as Goods and Services Tax (G.S.T), SingleBusiness Tax, or Turnover Tax in some countries, applies the equivalent of asales tax to every operation that creates value. To give an example, sheet steelis imported by a machine manufacturer. That manufacturer will pay the VAT onthe purchase price, remitting that amount to the government. The manufacturerwill then transform the steel into a machine, selling the machine for a higher price

to a wholesale distributor. The manufacturer will collect the VAT on the higherprice, but will remit to the government only the excess related to the "valueadded" (the price over the cost of the sheet steel). The wholesale distributor willthen continue the process, charging the retail distributor the VAT on the entireprice to the retailer, but remitting only the amount related to the distribution mark-up to the government. The last VAT amount is paid by the eventual retailcustomer who cannot recover any of the previously paid VAT. For a VAT and
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sales tax of identical rates, the total tax paid is the same, but it is paid at differingpoints in the process.

VAT is usually administrated by requiring the company to complete a VAT return,giving details of VAT it has been charged (referred to as input tax) and VAT it hascharged to others (referred to as output tax). The difference between output taxand input tax is payable to the Local Tax Authority. If input tax is greater thanoutput tax the company can claim back money from the Local Tax Authority.

Sales taxes

Sales taxes are levied when a commodity is sold to its final consumer. Retailorganizations contend that such taxes discourage retail sales. The question ofwhether they are generally progressive or regressive is a subject of much currentdebate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food,utilities and other necessities from sales taxes, since poor people spend a higherproportion of their incomes on these commodities, so such exemptions make thetax more progressive. This is the classic "You pay for what you spend" tax, asonly those who spend money on non-exempt (i.e. luxury) items pay the tax.

A small number of U.S. states rely entirely on sales taxes for state revenue, asthose states do not levy a state income tax. Such states tend to have a moderateto large amount of tourism or inter-state travel that occurs within their borders,allowing the state to benefit from taxes from people the state would otherwise nottax. In this way, the state is able to reduce the tax burden on its citizens. The

U.S. states that do not levy a state income tax are Alaska, Tennessee, Florida,Nevada, South Dakota, Texas,[17]Washington state, and Wyoming. Additionally,New Hampshire and Tennessee levy state income taxes only on dividends andinterest income. Of the above states, only Alaska and New Hampshire do notlevy a state sales tax. Additional information can be obtained at theFederation ofTax Administrators website.

In the United States, there is a growing movement[18]for the replacement of allfederal payroll and income taxes (both corporate and personal) with a nationalretail sales tax and monthly tax rebate to households of citizens and legalresident aliens. The tax proposal is named FairTax. In Canada, the federal sales

tax is called the Goods and Services tax (GST) and now stands at 5%. Theprovinces of British Columbia, Saskatchewan, Manitoba, and Prince EdwardIsland also have a provincial sales tax [PST]. The provinces of Nova Scotia, NewBrunswick, Newfoundland & Labrador, and Ontario have harmonized theirprovincial sales taxes with the GSTHarmonized Sales Tax [HST], and thus is afull VAT. The province of Quebec collects the Quebec Sales Tax [QST] which isbased on the GST with certain differences. Most businesses can claim back the
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GST, HST and QST they pay, and so effectively it is the final consumer who paysthe tax.

OTHER TAXES

License fees

Occupational taxes or license fees may be imposed on businesses or individualsengaged in certain businesses. Many jurisdictions impose a tax on vehicles.

Poll tax

A poll tax, also called a per capita tax, or capitation tax, is a tax that levies a setamount per individual. It is an example of the concept of fixed tax. One of the

earliest taxes mentioned in the Bible of a half-shekel per annum from each adultJew (Ex. 30:11-16) was a form of poll tax. Poll taxes are administratively cheapbecause they are easy to compute and collect and difficult to cheat. Economistshave considered poll taxes economically efficient because people are presumedto be in fixed supply. However, poll taxes are very unpopular because poorerpeople pay a higher proportion of their income than richer people. In addition, thesupply of people is in fact not fixed over time: on average, couples will choose tohave fewer children if a poll tax is imposed.[19][not in citation given] The introduction of apoll tax in medieval England was the primary cause of the 1381 Peasants'Revolt. Scotland was the first to be used to test the new poll tax in 1989 with

England and Wales in 1990. The change from a progressive local taxation basedon property values to a single-rate form of taxation regardless of ability to pay(the Community Charge, but more popularly referred to as the Poll Tax), led towidespread refusal to pay and to incidents of civil unrest, known colloquially asthe 'Poll Tax Riots'.

Other

Some types of taxes have been proposed but not actually adopted in any majorjurisdiction. These include:

Bank tax

Financial transaction taxes including currency transaction taxes

Descriptive labels given some taxes

Ad valorem

An ad valorem tax is one where the tax base is the value of a good, service, orproperty. Sales taxes, tariffs, property taxes, inheritance taxes, and value added
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taxes are different types of ad valorem tax. An ad valorem tax is typicallyimposed at the time of a transaction (sales tax or value added tax (VAT)) but itmay be imposed on an annual basis (property tax) or in connection with anothersignificant event (inheritance tax or tariffs). An alternative to ad valorem taxationis an excise tax, where the tax base is the quantity of something, regardless of its

price.

Consumption tax

Consumption tax refers to any tax on non-investment spending, and can beimplemented by means of a sales tax, consumer value added tax, or bymodifying an income tax to allow for unlimited deductions for investment orsavings.

Environmental taxSee also: Ecotax, Gas Guzzler Tax, and Polluter pays principle

This includes natural resources consumption tax, greenhouse gas tax (Carbontax), "sulfuric tax", and others. The stated purpose is to reduce the environmentalimpact by repricing.

Fees and effective taxes

Governments may charge user fees, tolls, or other types of assessments inexchange of particular goods, services, or use of property. These are generallynot considered taxes, as long as they are levied as payment for a direct benefit tothe individual paying.[20]Such fees include:

Tolls: a fee charged to travel via a road, bridge, tunnel, canal, waterway orother transportation facilities. Historically tolls have been used to pay forpublic bridge, road and tunnel projects. They have also been used in privatelyconstructed transport links. The toll is likely to be a fixed charge, possiblygraduated for vehicle type, or for distance on long routes.

User fees, such as those charged for use of parks or other governmentowned facilities.

Ruling fees charged by governmental agencies to make determinations inparticular situations.

Some scholars refer to certain economic effects as taxes, though they are notlevies imposed by governments. These include:
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Inflation tax: the economic disadvantage suffered by holders of cash and cashequivalents in one denomination of currency due to the effectsof expansionary monetary policy.

Financial repression: Government policies such as interest rate caps ongovernment debt, financial regulations such as reserve requirements and

capital controls, and barriers to entry in markets where the government ownsor controls businesses.

Income tax slab 2012-2013

The Income Tax Slab for ay 12-13 are not much different from taxslabs for ay 11-12.

In the newly proposed income tax rates the slab ranges have been

revised upwards but the changes are not much significant other than

for citizens above 80 years of age. There will be an additional saving ofRs 2000 as per the union budget present by finance minister Pranab

Mukherjee on 28th February 2011

In income Tax Slab for ay 12-13 / fy 11-12, basic tax exemption limits

are same as in the old tax slabs but the Indian finance ministry hasbroadened the tax slabs for men and senior citizens. The threshold

income tax exemption limit for men has been revised to Rs1,80,000 than the previous limit of Rs 1,60,000.There will be aminimum saving of Rs 2000 in income tax than previous year.

A new income tax bracket for senior citizens has beenintroduced which are above eighty years of age. The tax

exemption limit to senior citizens above 80 of age has been

increased to Rs. five lakhs from the existing 2.4 lakhs. For senior

citizens between 60 to 80 years the tax exemption limit has beenrevised to Rs 2,50,000 from Rs 2,40,000 thus an increase of Rs10,000 only. The senior citizen age has also been reduced to 60 yearsfrom 64 years.

There is no change in tax structure for women.
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In new tax structure tax exemption of Rs. 20,000 on investment in taxsaving Infrastructure bonds is also maintained and there is no changein this as compared to previous year. This is in addition to exemption

of up to Rs. 1, 00,000 already allowed under specific savings

instruments.

The new and revised income tax slabs and rates applicable for the

financial year (FY) 2011-12 and assessment year (AY) 2012-13 arementioned below:

New Income tax slab for ay 12-13

New Income Tax Slabs for ay 12-13 for Resident Senior Citizens above 60 years(FY 2011-12)

S. No. Income Range Tax percentage

1 Up to Rs 2,50,000 No tax / exempt

2 2,50,001 to 5,00,000 10%

3 5,00,001 to 8,00,000 20%

4 Above 8,00,000 30%

New Income Tax Slabs for ay 12-13 for Resident Senior Citizens above 80 years

(FY 2011-12)

S. No. Income Range Tax percentage


2 5,00,001 to 8,00,000 20%

3 Above 8,00,000 30%Income Tax Slabs for ay 12-13 for Resident Women (below 60 years) (FY 2011-12)


2 1,90,001 to 5,00,000 10%

3 5,00,001 to 8,00,000 20%

4 Above 8,00,000 30%

New Income Tax Slabs for ay 12-13 Others & Men (FY 2011-12)


2 1,80,001 to 5,00,000 10%

3 5,00,001 to 8,00,000 20%4 Above 8,00,000 30%

For normal category the simple calculation is as follows

Taxable Income in 10% slab maximum tax will be Rs 32000


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Taxable Income in 20% slab maximum tax will be Rs 32000 +Rs 60000 total Rs 92000

Taxable Income in 30% slab minimum tax will be Rs 92000

Education and other cess will be in addition to this

Tax exemption limit raised to Rs 2 lakhs and tax rates has changed for other slabs too.

Find the latest income tax slab for Year 2012-2013 based on the budget presented on 16

March 2012.

Use our Free income tax calculator for getting an idea of how much tax you will be

saving compared to last year per the latest tax rates.

India Income tax slabs 2012-2013 for General tax payers

Income tax slab (in Rs.) Tax

0 to 2,00,000 No tax

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

India Income tax slabs 2012-2013 for Female tax payers


0 to 2,00,000 No tax

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

India Income tax slabs 2012-2013 for Senior citizens (Aged 60 yearsbut less than 80 years)


0 to 2,50,000 No tax

2,50,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%
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India Income tax slabs 2012-2013 for very senior citizens (Aged 80and above)


0 to 5,00,000 No tax

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

The Effects of Taxation on the Economy

Gasoline prices have reached an all time record high. A big portion of the cost ofgas can be blamed on the taxes alone. Since the global market knows thatgasoline is a demand, they know they can raise the price and consumers will stillpurchase it. They may look for ways to not use so much gas such as car pooling ortaking a bus but overall, they will most likely have to purchase it. The tax affectsthe equilibrium price and quantity because there is a decrease in the overallsupply and an increase in demand. This is where the equilibrium price will rise.

A hypothetical situation in this market where a price ceiling could be imposed is

if there was a set rate of $1.50 per gallon of gasoline and no one could sell it for

higher then that. This would be

great for the consumers since there would be no chance ofgas pricesrising but on

the other hand, it could be a huge disadvantage for the producers and the sellers.

If the sellers are buying it from the producers for a price that is near $1.50, they

would profit very little. Eventually they would more then likely stop selling it due

to such a small profit they are making off of it. Then the producers would lose

business and would not be able to afford to maintain their field anymore.

Many states have also seen a rise in tobacco products in the past year due to the

rise in taxes. The government claims that the reason behind this is to protect the

health of Americans but many people do not agree. They believe that it is theirchoice and the government should not raise prices and blame it on this. Tobacco

is no where near a necessity for anyone but some may still feel that it is

something they need if of course they have been smoking for years and have

become addicted. The tax on tobacco affects supply and demand extremely. For

smokers who are not sufficiently addicted to cigarettes, they are strongly affected
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by it's price. For the smokers addicted to cigarettes, they may also be affected

personally but continue to buy them no matter how high the cost goes. Since this

increase in price, many people have quit or cut back on smoking. Also, there is

not as many people taking up this habit as there were when cigarettes were more

affordable. Kids also do not have so many people influencing them to take up thishabit so in the long run, it looks like tobacco products will continue decreasing in

popularity. Overall, the demand for tobacco products is decreasing as the supply

is increasing. The equilibrium price also increases and the quantity decreases.

If a price floor was imposed on tobacco products and the price of a pack of

cigarettes could not be less then $6, the market would suffer. More and more

people would stop smoking and less and less people would start leaving tobacco

companies suffering from loss of customers. Gas stations and convenient stores

would not buy as many cartons from the tobacco companies which would hurtthe companies tremendously. Depending on the other products they sell in the

store and how successful they are, they may also be highly affected due to this.

These are just two areas affected by taxation of their product. Taxation effects the

economy in many different ways and continues to rise in just about every product

out there. With minimum wage ranging from roughly $4.25 to $7.25, many

people are having a hard time affording everyday things. Our economy continues

to be affected by the cost of products sky rocketing and in the years ahead it looks

like it will only become worse if something is not done to stop it.

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