CIGARETTE TAXATION BY THE AMERICAN STATES

The excise taxation of cigarettes by the American states is examined upon the assumption that the setting of the rates by public officials bears some relation to economic conditions prevailing in the relevant market for cigarettes. Special attention is paid to the activity of bootleggers and so to relationships of out-of-state prices to home-state market magnitudes. Some of the model's implications are subjected to testing and are contrasted with predictions of the standard analysis of selective excise taxation.