The Case for a Cigarette Tax, in One Graphic

Ezra Klein

Washington Post- June 20, 2013

Presented by Tibu Thomas

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/20/the-case-for-a-cigarette-tax-in-one-graphic

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Accessed on Sep 22, 2013

Budget-2014

• The President’s new budget proposal of a 94-cent-a-pack hike on federal cigarette taxes in 2014 to fund early childhood education programs increases the federal tax on cigarettes from $1.01 a pack to $1.95.

• The new cigarette tax would raise an estimated $78 billion over the next decade, and would reduce smoking due to high prices.

• The Congressional Budget Office says the health improvement from decreased smoking would save the government millions of dollars over 10 years and generate additional revenue through increased earnings for healthier workers.

Smoking Related Deaths

• The adverse health effects from cigarette smoking account for more than 440,000 deaths, (one in every five deaths), each year in the U.S.

• More deaths are caused each year by tobacco use than by HIV, illegal drug use, alcohol use, motor vehicle injuries, suicides, and murders combined.

• Smoking causes an estimated 90% of all lung cancer deaths in men and 80% of all lung cancer deaths in women.

Source: CDC, Annual Deaths Attributable to Cigarette Smoking—United States, 2000–2004

Cigarette Taxes

• Cigarette taxes are a proven strategy to reduce smoking - especially among younger people - and extend lives (four in five adult smokers started before they were 18).

• A 10 percent rise in cigarette prices will reduce smoking by 5-15 percent among people under age 18 and by 3-7 percent among adults.

Source: Center on Budget and Policy Priorities cbpp.org.

• The link between

cigarette prices and

peoples behavior is

often described by

“elasticity.”

Data Source: CBO

Elasticity

Price

1 %

P a

P b

S b S a

0.3%

Smokers

Congressional Budget Office’s Estimate

Life Expectancy in 2013, by Smoking Status

30-Year-Old

45-Year-Old

60-Year-Old

56

41

26

48

33

19

47

32

19

Lifetime Smokers Typical Smokers Non-Smokers

Age

Life ExpectancyData Source: CBO.

Increase in Population

Number of Additional People

2013 2016 2019 2022 2025 2028 2031 2034

70,000

50,000

60,000

10,000

20,000

30,000

40,000

0

All Adults

65 or Older

18 to 64 Years Old

Increase in Population Due to the Policy

Data Source: CBO.

Health-Related Effects

Percentage of GDP

2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085

0.014

0.012

0.010

0.008

0.004

0.006

-0.004

-0.002

0

0.002

-0.006

Total Effects on Revenues from Improvements in Health

Effects of Changes in Labor Earnings per Capita

Effects of Increased Longevity

Effects of Lower Health Insurance Premiums

Net Effects on the Deficit from Improvements in Health

Health-Related Effects Due to the Policy

Data Source: CBO.

Summary/Discussion

• The adverse health effects from smoking accounts for one in every five deaths in a given year in the U.S.

• Tobacco taxes are a proven strategy to reduce smoking, especially among younger people.

• Health improvement from decreased smoking would save the government millions of dollars over 10 years and generate additional revenue through increased earnings for healthier workers and tax increase.

• Discussion: Some opponents argue that raising tobacco taxes would unfairly affect low-income people since they have higher smoking rates. But some argue that low-income people would benefit more from the health improvements from cutting consumption.

And…