Businessweek Archives

The Tobacco Tax Is No Sin


Editorials

THE TOBACCO TAX IS NO SIN

Extending adequate health care to millions of uninsured and underinsured Americans will cost upwards of $40 billion a year, and President Clinton and Hillary Rodham Clinton clearly favor a big boost in the federal cigarette tax. Startled by reports that the tax could go up by $2 per pack--on top of the current 24 a pack--the tobacco industry lost no time in arguing that any such increase would be unfair to the more than 40 million Americans who smoke. The tax would be highly regressive: It would hit with greatest force those people who are least able to afford it, low-income Americans. But the benefits that it might yield, for national health as well as federal finances, well outweigh that burden.

Someone who smokes a pack and a half a day will have to spend about $1,000 a year if the tax is adopted. Unfair? Not if you consider the enormous health costs incurred by smokers. Smoking was involved in 434,000 deaths in the U.S. last year, and the habit costs the nation more than $65 billion annually in health-care outlays and lost productivity. Yet last year, federal and state cigarette taxes brought in just $11 billion. Raising cigarette taxes by $2 a pack would generate some $30 billion a year in federal revenues--even after allowing for a fall-off in consumption.

Raising tobacco taxes is also the most effective way to reduce the human cost of smoking. Look at the example of Canada, whose federal and provincial governments more than quadrupled cigarette taxes, to about $3 (U.S.) in the 1980s, pushing the price of a pack to $4.45 today. Since 1982, per capita consumption has plunged 38%, while the percentage of teenagers who smoke is down 60%. Canada's experience suggests that a $2-per-pack increase in the U.S. could cut consumption by 23% within a couple of years and eventually prevent 2 million premature deaths.

While $2 a pack may sound high, per-pack taxes total $3.68 in Denmark, $2.55 in Britain, and $2.11 in Germany. The knowledge of smoking's dangers has reduced consumption in the U.S., but every year the tobacco industry wins new customers--and the health industry some potential candidates for expensive and often fruitless care. Raising the financial disincentive could make Americans healthier and help finance a new, inclusive health-care system at the same time.


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus