Gruber, J., &Mullainathan, S. (2006). Do cigarette taxes make smokers happier?. In Happiness and Public Policy (pp. 109-146). Palgrave Macmillan, London.
Economists have a well-established framework for understanding the welfare consequences of taxing goods that don’t create externalities. Taxes create dead-weight loss by causing consumers to distort their consumption away from their preferred choices. This cost is weighed against the benefits of government revenue. As established in the seminal analysis of Becker and Murphy (1988), this argument applies equally well to both addictive and nonaddictive goods. ...