From Our 2012 Archives

Steep Cigarette Tax Hike Could Save Lives, Money: Report

By Amy Norton
HealthDay Reporter

WEDNESDAY, Nov. 28 (HealthDay News) -- A 50-cent increase in the U.S. tax on cigarettes could have a big impact on public health, though the benefits for the national wallet are less clear, new estimates from the U.S. Congressional Budget Office show.

Reporting in the Nov. 29 issue of the New England Journal of Medicine, the Congressional Budget Office (CBO) estimated that such a steep hike in the federal cigarette tax could result in more than 3 million more nonsmokers by 2085 -- by either spurring people to quit or keeping would-be smokers from ever lighting up.

And that 3 million includes roughly 200,000 people who would have otherwise died before that year, according to the CBO, which does independent analyses of budget issues for Congress.

A number of studies have already shown correlations between tobacco prices and people's propensity to smoke: The more it costs, the less likely people are to start the unhealthy habit.

The CBO used that research to estimate how a federal tax hike of 50 cents per pack -- up from the current $1.01 -- could affect people's health and longevity.

"There's no question it would be effective, and this report makes that point," said Dr. Michael Siegel, a professor of community health sciences at Boston University School of Public Health who studies tobacco control policies.

Cigarette taxes "are, in fact, so effective that people will live longer," Siegel said.

Where the effects are more muddied is in the federal budget. In the short term, the CBO said, the drop in the number of smokers would mean lower health care costs. The federal government would pay out $730 million less between 2013 and 2021.

Longer out, though -- up to 2085, the last year studied -- federal spending would be higher than it otherwise would be: All those extra people living into old age would mean bigger outlays for Social Security and Medicare.

Still, in the end, there could be a small economic benefit, the CBO estimated. When the office factored in the revenues from the cigarette tax, there was a small projected reduction in the federal deficit -- on the order of 0.023 percent of the gross domestic product (GDP) in 2035.

To put that dip into perspective, the CBO estimates that the deficit will exceed 7 percent of GDP in 2035.

Of course, the CBO report added, "consequences for the federal budget are only one factor that lawmakers may consider when developing policies to promote health."

Siegel was more blunt. He said it would be "perverse" to worry about how extending more lives would affect the federal bottom line. "The idea that we should base health policy on this is completely inappropriate," he said.

Siegel didn't challenge the CBO's work, but was against the notion of policymakers using the figures to make a decision on cigarette tax hikes. Anything that helps more Americans live to a ripe old age will mean more spending on Social Security and other programs for seniors, he noted.

"If we go by that, it would argue against doing any health intervention that extends people's lives past age 65," Siegel said.

Right now, the U.S. government spends about $1 trillion a year on health care, according to the CBO. If there were a 50 cent increase in the cigarette tax starting next year, federal spending would dip in the first decade, mostly through lower costs to Medicaid (the health insurance program for the poor) and Medicare, the CBO reported.

The government would also take in more than $40 billion in revenue through 2021, from the cigarette tax itself and from healthier people who were staying in the workforce longer, they noted.

To Siegel, the real issue is what to do with any money generated from a hike in the cigarette tax.

"I've argued for a long time that those revenues should go to anti-smoking campaigns and treating smoking-related diseases," Siegel said.

But the most recent hike in the federal tobacco tax went toward expanding the State Children's Health Insurance Program (SCHIP). Siegel called that "inappropriate," saying the program's solvency should not depend on Americans' continued smoking addiction.

All U.S. states also have their own cigarette tax, and that money goes to any number of projects, from building roads to funding education.

MedicalNewsCopyright © 2012 HealthDay. All rights reserved.

SOURCES: Michael Siegel, M.D., professor, community health sciences, Boston University School of Public Health; Nov. 29, 2012, New England Journal of Medicine