On Monday the New York Times ran a nice story detailing how Massachusetts is the newest in a long line of states hoping to fund health care initiatives by raising tobacco taxes. The report notes that “bills to raise tobacco taxes have been active in 22 state legislatures in 2008, according to the Tobacco Merchants Association, a trade group. That follows a year in which 11 states enacted increases, according to the National Conference of State Legislatures.” In other words, taxing cigarettes to fund health care reform is an increasingly popular strategy amongst policymakers across the nation.
Big Tobacco is not happy about this. The industry is putting a lot of time, effort, and money into snuffing out health care reform proposals—at both the state and national level—that rely on tobacco tax hikes for funding. In doing so, tobacco companies are torpedoing one of the few politically feasible strategies for raising funds needed to pay for reform.
Consider California. The Times notes that the state’s recent bipartisan plan for instituting universal health care, endorsed by Republican Gov. Arnold Schwarzenegger and Democratic Assembly Speaker Fabian Núñez, “died in the State Senate in January partly because of opposition to the $1.50-a-pack increase it included.”
This wasn’t the first time cigarette taxes have been an issue in California. In 2006, California voters turned back a ballot initiative, Proposition 86, that proposed to increase the cost of a cigarette pack by $2.60. Supporters of the proposition estimated proceeds from the tax at $2 billion—which would have been used to help fund health care reforms—and forecasted a $16.5 billion long-term decline in health care costs thanks to reductions in smoking. Good stuff.
But the proposition failed by a narrow margin: 48 percent of voters
approved the measure while 52 percent said no. Observers are quick to
note that this close call came about despite the fact that Big Tobacco
spent a whopping $65 million to fight Proposition 86, pouring that
money into lobbying and advertising.
These efforts often get ugly. The industry’s anti-tax campaign listed non-existent groups like the
“Chamber of Commerce of Los Angeles County” as being opposed to the
proposition. It also sent out mailers that attributed anti-86 stances
to politicians—wrongly—without their approval, and issued statements
suggesting that terrorists would somehow benefit from a higher tobacco
tax.
In retrospect, it’s unsurprising that tobacco companies got down and
dirty—after all, the tobacco industry has a lot invested in California.
A 2006 Business Week article breaks down the numbers:
“California is home to 9 percent of all U.S. smokers, and a successful
Prop 86 would certainly dent tobacco companies’ bottom lines. An
analysis by the Tobacco Control Section of the California Health
Services Dept. expects that it could cut cigarette sales by 312 million
packs a year. Let’s estimate, conservatively, that Philip Morris makes
a profit of 20 cents per pack. Given its 51 percent market share,
that’s a $32 million hit. Plus, the Tobacco Control Section predicts
the smoking rate among high school students will drop from 13.2 percent
in 2004 to 7.6 percent [after the passage of Proposition 86].”
Clearly, tobacco companies had a lot to lose. $65 million and lots of
lies later, however, it seemed they were safe. That is, until Governor
Schwarzenegger’s 2007-2008 health care plan began to garner public
support. In a February analysis, Daniel Weintraub of The Sacramento Bee noted
that “the basic outline of the governor’s plan – a requirement that
every Californian have insurance, with the costs shared by employers,
health care providers and individuals themselves – attracted the
support of 60 percent to 70 percent of those surveyed by the Public
Policy Institute of California in several polls taken during 2007.”
Here, it seemed, was a plan that could pass.
Of course, health care reform is never cheap because if you are going
to mandate that everyone have insurance, you must provide subsidies for
the many families who cannot afford to pay for it on their own.
California’s plan was estimated to cost $14 billion, to be funded
partly by an increase in cigarette taxes.
Enter Big Tobacco. The industry had been digging its heels into the Golden State’s political scene for years. According to an October report
from the Center for Tobacco Control Research and Education at the
University of California San Francisco School of Medicine, the tobacco
industry had already made major inroads into the CA State legislature
by the time Schwarzenegger’s proposal surfaced.
The report notes that “the [tobacco] industry steadily increased monies
spent on state level political activities in the period 2003-2007, from
$4,086,553 in 2003-2004 ($1,083,448 to candidates) to $4,359,205 in
2005-2006 ($1,895,584 to candidates).” In the 2005-2006 election cycle,
almost one quarter of the state legislators on committees relevant to
health care—the Health, Budget, and Appropriation committees in the
State Assembly and the Health, Human Services and Budget and Fiscal
committees in the State Senate—received contributions from the tobacco
industry.
It’s thus unsurprising that the tobacco tax became a sticking point for
California’s health care plan, and that the proposal sunk. But it’s not
just California that’s in Big Tobacco’s crosshairs—the shoot-out
between health care reformers and Big Tobacco extends across the
nation.
Last fall, Oregon saw its own ambitious health care reform plan
undermined by the tobacco industry. In November the state voted on
Measure 50, which would have increased cigarette taxes by 84.5 cents in
order to expand health coverage to 117,000 children in the state.
Calculations from supporters of the initiative estimated that the tax
hike would prevent more than 29,000 Oregon kids from becoming smokers,
spur more than 15,000 current adult smokers to quit for good, save more
than 13,000 Oregonians from premature, smoking-caused deaths, produce
more than $662 million in long-term health care savings, and raise more
than $94 million a year to expand health care coverage to kids. In
other words, the measure had a lot of upsides.
But Measure 50 didn’t pass—because good intentions can’t match the deep pockets of Big Tobacco. According to The Oregonian,
the tobacco industry set a new record for spending on a ballot
initiative campaign last year in order to block the measure. By October
2007, a month before the initiative was going to vote, “cigarette
companies ha[d] poured a record $6.6 million into defeating a proposed
tobacco tax increase, making the ballot measure campaign the most
expensive in Oregon history…R.J. Reynolds, the maker of Camel
cigarettes…put in $3.3 million…Philip Morris USA, the maker of
Marlboros, and its parent company…also put in $3.3 million…”
In contrast to these big bucks, by this point “supporters of [Measure
50]…raised $1.5 million, less than a quarter of the tobacco kitty.”
Most of this money came from hospitals, health care companies, and
unions. In the end, the tobacco industry wound up spending
“$12 million, almost four times the $3.2 million that proponents of”
Measure 50 finally shelled out. Unsurprisingly, the initiative failed.
A November editorial in the New York Times
lamented this outcome, calling it “a testament, more than anything
else, to the shamelessness of the nation’s big tobacco companies.” And
indeed, Big Tobacco’s lobbying was shameless: the industry hid behind a
front group called Oregonians Against the Blank Check,
which framed Measure 50 as a “blank check” for the government because
it raised too much money and fueled panic over the fact that the
measure represented “the first time the Oregon Constitution would be
amended for a single tax on a single product.”
The dynamics of the Oregon case are reminiscent of another instance
where childrens’ health care was sacrificed to appease tobacco
companies: last year’s controversy over SCHIP. This time, the expansion
of coverage was national in scope and the increase in cigarette tax was
to be 61 cents—but the results were the same. President Bush famously
vetoed the $35 billion expansion of SCHIP, in part due to his
opposition to taxes of any kind. In October, he said
that his opponents “haven’t seen a bill they could not solve without
shoving a tax hike in it. In other words, they believe in raising
taxes, and we don’t.”
Congress famously failed to overturn Bush’s veto. Big Tobacco was
happy: “At this moment, it appears that we have dodged a bullet,” said
Andy Zausner, a lobbyist for Lorillard Tobacco Co., told Politico.com
in October. No doubt the $12 million in lobbying that the tobacco
industry spent to fight SCHIP—in the first six months of 2007
alone—helped cigarette companies to get in the clear.
How’d Big Tobacco work its magic? “The nation’s biggest tobacco
companies were fairly tight-lipped about their tactics,” reported
Politico. “Bill Phelps, a Philip Morris USA spokesman, said the company
has reached out to other groups — including wholesalers, retailers and
tobacco growers — who would be hit by the proposed tax hike.”
Another tactic used by Big Tobacco in the SCHIP battle—and, in fact, in
every instance where discussions over tobacco taxes arise—is the
argument that a cigarette tax is regressive. And it is: about 33
percent of U.S. adults living below the poverty level are smokers, as
compared to 23.5 percent of those above the poverty level. That means a
greater share of poor people would get hit by the tax. Further, any
sales tax is inherently regressive, because poor people spend a greater
share of their income—so if you tax them more on what they buy, they
lose more of their total funds.
For these people, the tax would be costly. Under the proposal that the
Congress offered last year, Leonard Burman, Senior Fellow at the Urban
Institute, reported in Health Affairs
that a “pack-a-day smoker would pay $164 in additional taxes over the
course of a year…or $223 under the Senate plan. That amounts to 1
percent of income for a family earning $20,000, compared with 0.2
percent or less for a family earning $100,000.”
This sounds terribly unfair–until you think about other consequences of
the tax. First, as Burman notes, SCHIP “also disproportionately
benefits lower-income households since it is targeted at children with
incomes below 200 percent of the Federal Poverty Level (FPL).” So yes,
poor smokers would pay more—but they’d also get better coverage for
their children. “The annual cost of providing [SCHIP] coverage per
child is about $1,700,” continues Burman. And so, under an expanded
SCHIP, low-income families would have essentially paid $164 to get
$1,700 worth of coverage. Not a bad deal.
The second important realization is that higher tobacco taxes reduce
smoking, especially among children. Burman notes that research has
shown “that a 10 percent increase in the price of cigarettes would
reduce youth smoking by more than 10 percent.” Not having a lot of
disposable income, children are very sensitive to price fluctuations:
so more expensive cigarettes means less smoking. Adults, while less
sensitive to these changes than children—because they have more
money—also become less likely to smoke as prices go up.
Ultimately, increasing tobacco taxes is a good thing, even for poor families.
Finally, a hike in tobacco taxes may be necessary if we want universal
health care. No matter how you slice it, health care reform is an
expensive endeavor. We’re going to need money.
Despite the fact that pollsters love reporting
that the American public is willing to pay more in taxes for better
health care, the truth is that many citizens—particularly wealthy
ones—don’t list universal coverage as a top priority. As Maggie has noted,
a March poll from the Kaiser Family Foundation found that only 27
percent of households earning over $75,000 rated universal coverage as
one of the two most important issues in the coming election. By
contrast, 50 percent of those in households where joint income equals
less than $49,999 named health care as one of their two top concerns.
The point is this: when looking for ways to fund health care reform,
tax hikes will almost inevitably be part of the mix, and in all
likelihood some will be focused on the wealthy. (For one, Congress is
very likely to let the Bush tax cuts expire.) But how much can we bank
on cooperation from affluent, well-insured taxpayers? Common
sense—and experience—tell us that when you tell people that their taxes
are going up, you’re going to have some pushback. This could be a
stumbling block to reform.
But cigarette taxes are another issue all together. The harmful effects
of smoking are well known and beyond doubt. And fewer people are
smoking today than ever:
currently the nation’s per capita consumption of tobacco is at levels
not seen since the 1930s. Last but not least, more and more states and
cities are imposing smoking bands in public places.
In other words, smoking is falling out of favor with the public—we know
it’s dangerous and it’s no longer the fact of life that it once was.
And so people are willing to tax it. In Oregon, polls
showed that 59 percent of registered voters said they would support the
Measure 50 tax increase, compared with 35 percent who opposed it. With
regards to SCHIP, last year the American Medical Association reported
that “by a more than two-and-one-half to one ratio (70 percent versus
27 percent), support exists for a 30-cent increase in per-pack
cigarette taxes to pay for ‘health care coverage to uninsured
children.’ Significantly, that support is nearly identical (67-28
percent) for a 75-cent per-pack increase dedicated to the same
purpose.” In other words, people don’t care how much tobacco is taxed.
This is a strong sign that tobacco taxes could be a useful short-term
cash cow as health care reform struggles to get off the ground.
Of course, Big Tobacco continues to fight back—and it’s fighting hard.
In February, the tobacco industry took on Kansas, where state leaders
were considering a 50-cent tax increase on cigarette packs to help fund
health care reform. R.J. Reynolds Tobacco Company, which makes one out
of every three cigarettes sold in the U.S., rolled out a lobbying
campaign to oppose the measure. Included in this campaign were e-mails
to smokers encouraging them to attend anti-cigarette tax rallies at the
Statehouse. According to ABC’s Kansas City affiliate,
one such e-mail read: “It seems they still want more of your
hard-earned money. It’s time to tell Governor [Kathleen] Sebelius and
other politicians that enough is enough!” In March, the tax hike died in the state legislature.
Big Tobacco is right: enough is enough. That an industry that
manufactures poison has been able to block health care reform is not
just ironic, it’s tragic. Going forward, reformers need to push back by
reminding voters that if all Americans stopped smoking—beginning with
this generation of teens—that would do more to improve the health of
the nation that any other reform.
I don’t see the point of picking on the tobacco industry to pay for health care reform. I recognize cigarette smoking isn’t healthy, but cigarette smoking is not the reason our health care industry is broken. I’m glad to know about the tobacco industries battles, though, now I know where reformers might find financial support to go up against those deep-pocketed lobbyists.
This is still a free country, we’re free to choose. Lots of people make unhealthy choices. Unprotected sex, alcohol, heck, I drink more Pepsi than I do water. Dietery choices, not getting enough sleep, stress, our lives are filled with unhealthy choices, which is why we need a healthcare system that is available to treat us when we’re sick or hurt from our unhealthy choices. How about a bungee-jumper tax to pay for reform? Skydiver tax? We can expand that to include airplanes, and everything related to the airline industry, since skydivers are brought to the skies by airplanes. How about an excess chocolate tax? Too much chocolate is not healthy. My point is, going down this road leads to many other, I think dangerous roads. How about a national lottery?
Maggie, a couple of weeks ago you advocated pulling the plug on MA, a program very popular with (and helpful to)low-income minorities.
Now you’re advocating an indisputably regressive tax that would fall hardest on low-income minorities.
Très intéressant, non?
I think there is no question that higher tobacco taxes will reduce the incidence of smoking, especially among children. That’s a good thing. On the other hand, it is highly likely that the reduced cigarette consumption will quickly drive tobacco tax revenue below the level estimated by budget experts and tax hike advocates. If politicians think they can pay for health insurance reform with higher taxes on tobacco instead of raising other, much less popular taxes, revenue is likely to be well below estimates. Moreover, once the price of a pack of cigarettes exceeds $5-$6 or thereabouts, diminishing (revenue) returns are likely to set in as demand declines. It’s disingenuous for politicians to suggest that higher tobacco taxes are a “free lunch” way to pay for health insurance reform or anything else.
Moreover, the notion that reduced cigarette consumption will save money for society is a controversial subject that was challenged by a recent study out of Netherlands. Since smokers, as a group, die sooner than non-smokers (seven years sooner according to the study), their lifetime healthcare costs are lower than those of healthy people. In addition, they will collect Social Security and other pension benefits for fewer years.
I have no problem with higher tobacco taxes as a way to curtail smoking, but as a revenue raiser, diminishing returns will set in sooner rather than later.
Barry, once again, all very good points and “Why didn’t I think of that?” I was more focused on the targeting of one industry specifically. In fact I’ve been thinking about this all day. To go that road, why not target ALL industries that create higher use of healthcare? How about the Alaskan crab fishing industry? The construction industry? Healthcare industry itself…healthcare workers are at a much higher risk of sickness and injury as a result of their workplace. Police officers should pay more for healthcare. Hey, they chose the dangerous job, right? Let me clarify, I’m not advocating any of these things because I think it will lead to things like genetic testing and increased costs to those “pre-disposed” to disease, which could lead to “personality” testing and spiking the costs to those with “addictive” personalities because, hey, they’re at a higher risk of becoming smokers or alchoholics.
I’m being facetious, just illustrating my point of view that I don’t think it’s reasonabile or fair to target just the tobacco industry. However, I HAVE been thinking about this all day…on another thread a reader stated at his company they used a sliding scale to pay for health insurance coverage, the receptionists paid a percentage of the coverage based on their income, etc. Higher paid workers paid more. This is somewhat related to targeting tobacco, ok let’s say we target tobacco then we have to create this sliding scale the same way. Smokers, roofers, astronauts, crab fishermen, you guys are all going to pay more for healthcare. Unintended consequences would be fewer roofers (ok, they’re a dime a dozen, anyway), astronauts (bad), etc, or escalating salaries for same.
Basically what I’m saying is, this is what’s been batting around in my head all day, and so far I can’t think of how any of this is a good idea, but at the same time when these types of random, “batting around” ideas start rattling around up there, I feel like I’m dancing all around a really good “AHA!” moment so I just thought I’d throw this out here for discussion. I’m still not seeing any ‘AHA’ because I think all men are created equal, but it seems like this might be worth exploring. Barry, can I get your email address? We could use your input and I would like to invite you to join our email group.
PS, To Catron, this blog says it was posted by Niko, not Maggie
Lisa,
The rationale behind taxing tobacco products is pretty straightforward, I think. The health dangers of smoking have been well known for decades culminating in the release of the Surgeon General’s Report in 1964. In a market economy, businesses, including yours, I’m sure, need to set your prices or bids at a level sufficient to cover your costs and provide an adequate profit. However, products that impose external costs on the society such as adverse health or environmental risks should have taxes imposed on them to recapture the societal costs to deal with the external risks imposed. I call this full social costing. That is, at the end of the day, product prices should reflect the full social cost of producing them. I also support carbon taxes on gasoline, heating oil, electricity, etc. to mitigate global warming. Gasoline taxes (and/or tolls) also are a useful way to finance the building and maintenance of roads and bridges. A complicating factor is that we need to be able to design a tax that can be fairly applied across a product or industry and effectively administered. This is easy for tobacco and gasoline but would be very difficult for unhealthy foods containing excess fat and sugar, for example.
With respect to wages, for the most part, wages tend to be a function (unionization rates aside) of the skill, education, responsibility, danger and health risks inherent in performing the work. The latter two largely account for why coal miners make a lot more than bank tellers.
On charging people different amounts for healthcare depending on what they do, this is part of what medical underwriting is all about. I think community rating, or at least modified community rating (based on age) which they have in Massachusetts is a better way to go. As an aside, it was one of my former employers who used the sliding scale to pay for health insurance. I (and Maggie) think that’s a better approach to determine the employee’s share of health insurance costs as opposed to a flat dollar amount or a percentage of the employer’s premium cost.
If you like, you can e-mail me at bcarol@optonline.net.
To chew on:
http://content.nejm.org/cgi/content/abstract/337/15/1052
brad
Taxes can perform one of two purposes, they can raise revenue for the government or they can influence behavior. The “sin” taxes are usually aimed at reducing behavior in those areas society thinks are undesirable.
The problem is that you can’t do both with the same tax. If your tax is successful and reduces the undesirable behavior your income stream dries up. Using a tobacco tax to fund needed programs in health is an easy out for legislators who don’t want to have to make the hard choices that will affect the bulk of the population. This is a cop out and won’t work.
The proper way to fund universal health care is though a universal taxation scheme. This can be adjusted to be as progressive as desired, but it needs to be paid by everyone, since everyone benefits. This is the genius of Social Security, it belongs to everyone and no one who works escapes paying their share. The basic fairness of this scheme is why it continues to be so popular.
Would a special state income tax, for example, be any easier to get enacted? Probably not, but at least the special interest groups would not be able to influence legislation. Objections about it being unaffordable by the poor could be handled by a proper collection policy, say exempting the first $20K from the tax, or some other similar scheme.
Ok, well what about the proposal in HR 676, flat 4% payroll tax from the employee, 4% from the employer. Maybe I should post this on the other thread. Any detractors to HR 676?
“Any detractors to HR 676?”
Lisa,
Yes! After reviewing HR 676 on Congressman Conyers’ website, I have a lot of problems with the proposal.
First, the bill promises to drastically reduce out-of-pocket payments under the current system AND cover long term care which only Medicaid covers (on a means tested basis) and Medicare covers to an extremely limited extent now. If we attempted to cover long term care for everyone, I predict people who are currently caring for elderly relatives at home at no cost to taxpayers (but considerable cost and sacrifice to the family) would come out of the woodwork by the hundreds of thousands to claim benefits, especially if we also covered assisted living as well as skilled nursing facilities. We wouldn’t have enough beds, and, if we did, it would be wildly expensive.
Second, proponents claim that out of $2.8 trillion in total system healthcare costs estimated for 2010, they could save fully 10% of that or $278 billion per year on administrative costs. This is fantasy. I think in the best case, a single payer system might be able to save on the order of 2%-4% of system costs from administration, a far cry from 10%. Think about it. Of the approximately 5 million people who work in hospitals, very few of them have anything to do with billing or calling insurance companies to verify coverage or get approval for treatments. Maggie has written before that about 20%-22% of healthcare costs are attributable to doctors’ fees. Half of that or 10%-11% represents practice expenses including office rent, equipment, supplies, malpractice insurance and staff. Doctors who outsource their billing to third party firms are generally charged about 5% of the revenue actually collected while high billing specialists pay less. This implies that only 1% of system costs is attributable to physician billing. If private insurers were eliminated and replaced with a Medicare for All system, according to Maggie, we would save, at most, 2% of system costs.
Third, proponents expect to save 30% on prescription drugs and durable medical equipment by having the government negotiate lower prices. This could prove challenging with respect to drugs unless the government is prepared to tell people that they will have to live with a much more restrictive formulary which is what the VA does. As it stands now, according to IMS Health, 65% of all prescriptions are already generics though they account for only 16% of the dollars spent on drugs.
Finally, I have a huge problem with the proposed financing. For perspective, according to the Congressional Budget Office (CBO), we raised $869 billion in 2007 from Social Insurance taxes (Social Security and Medicare) and $1.16 trillion from the income tax. Social Insurance or FICA taxes in 2007 (employer and employee combined) were 12.4% on the first $97,600 of wages for Social Security and 2.9% on all wages for Medicare.
HR 676 proposes to raise $150 billion per year from a 0.25% transfer tax on both buyers and sellers of stocks. If Rep. Conyers ever took an economics class, he probably forgot everything he learned. A transfer tax would drive a large chunk of stock trading offshore (beyond the U.S. taxing jurisdiction), it would sharply reduce the volume of trading generally, would increase frictional transaction costs and reduce returns from risk taking. I don’t think it could pass, and, if it did, there would be significant adverse economic consequences, in my judgment.
The proposal also expects to raise $100 billion per year from closing corporate tax loopholes. Any economist will tell you that corporations, in the end, do not pay taxes; people do. Corporate taxes are generally passed on in higher prices, lower wages and/or lower returns to shareholders, though nobody can tell you the precise allocation of the corporate tax burden. Even liberal House Ways and Means Committee Chairman, Charles Rangel (D., NY) proposes to reduce the corporate income tax rate from its current level of 35% (which is the 2nd highest in the world after Japan) and offset the cost by broadening the tax base. He recognizes that high corporate taxes are anti-competitive job killers.
The bill expects to raise $251 billion per year by letting the Bush tax cuts expire. I expect this proposal to pass, at least with respect to taxpayers in the $200-$250K and above income bracket. Another $200 billion per year is anticipated from a 5% income tax surcharge on the top 5% of earners and a 10% surcharge on the top 1%. I’m not sure if he means a surcharge of 5 and 10 percentage points added to the top marginal rate (which would go back to 39.6% if the Bush tax cuts expire) or a 5% and 10% addition to whatever the tax bill is without the surcharge. Whichever it is, attempts to soak high income people to this extent are unlikely to work. Besides, many people in those income brackets have options available to them ranging from working less to retiring altogether if they are nearing retirement age anyway to realizing fewer capital gains by not selling stocks to putting more of their money into tax free bonds. I’ve said many times that if people really want comprehensive reform, at the end of the day, the broad middle class will have to pay to insure the broad middle class, most likely in the form of a payroll tax that would be about the same order of magnitude as current FICA taxes or a value added tax of 15% or so of the price of the products and services to which it applies. Whatever we do, I think it is critical that any financing mechanism be as visible and transparent as possible so people fully understand how much they are paying for whatever it is they eventually get.
All, thanks for the comments–a lot to cover here.
As to the question of cigarette tax as long term revenue, Barry, I think you’re right, it’s not the ultimate answer, hence why I called it “a short-term cash cow.” There will definitely have to be other taxation involved in raising funds.
But there are two ways to look at the role of the tobacco tax in health care reform. One way is, as you suggest, to say that it will only provide an out for politicians who want to make the tough choices. Another way, however, is to think about health care reform as, in part, a problem of activation energy: getting it started is the hardest part.
How’s a tobacco tax address this problem? The point of the tobacco tax isn’t to fix the nation’s health care crisis, but to, in effect, help health care reform get its foot in the door. The ideal sequence of events is:
People are comfortable with the tobacco tax, so politicians tax it; this revenue goes toward effective and meaningful reform that can indicate the potential of further reform; politicians, seeing this positive outcome, associate less risk with further health care reform; this makes them more likely to embrace further reform.
I sort of see the tobacco tax as start-up money to fund an initial enterprise so that it can prove its worth and subsequently attract greater investment. This of course assumes that the tobacco tax money will be put to good use–and that Big Tobacco would get out of the way!
Brad, about smokers living longer and thus driving up health care costs: one, do we really want to say that smoking is okay because it kills more people and saves us a buck? Two, costs rise if smokers live–but only if our health care system remains unchanged. Were the system to implement cost-effective measures (more preventive care, comparative effectiveness, more selective care, less me too drugs)it could better handle healthier people, and thus the cost of healthy would-be smokers is less of an issue.
Finally, Lisa, I think there’s a difference between smoking and other “risky” behavior. First, smoking is addictive. For everyone. Period. That means, at some point, it’s not really a choice anymore, at least not in the same way that, say, skydiving is.
Second, smoking produces more up-front health care costs than other at-risk behavior. MIT research has shown that the total social cost of smoking over a lifetime — including both private costs to the smoker and costs imposed on others (including second-hand smoke and costs of Medicare, Medicaid, and Social Security) — comes to $106,000 for a woman and $220,00 for a man. All in all, experts peg the social cost of smoking at about $73 billion. There comes a point where risky behavior becomes everyone’s problem, if only for the social costs it incurs. I think this is such a case.
Raising the cigarette tax is a fairly long-term funding strategy. You just have to keep raising it periodically to keep up with inflation, and the decline in smoking. Another option would be to automatically build in an inflation index in the tax structure, but legislatures don’t go for that.
New York and Chicago have much higher tax rates, as do European countries, and they still see increases in revenue. That’s because the tobacco industry purposely keeps cigarette prices lower than the profit-maximizing price. The reason is they need to hook teens on smoking, and keeping the price low is critical for them. That’s why states can come in and raise the tax and reap revenue gains, despite the drop in consumption.
The tax isn’t regressive. Because low-income people are more price sensitive, raising the tobacco tax disproportionately causes low-income people to quit or cut back. Afterwards, low-income people pay less than before, since they also save from spending less on cigarettes. So from a macro point of view, though the tax is regressive, the increase is a net progressive measure.
One more point: in addition to the benefits of the revenue going to the poor, raising the cigarette tax makes the overall costs of the program go down. Fewer smokers means less health spending.
In Massachusetts, all of the political leaders support a tobacco tax increase targeted towards health reform. It’s a more stable and predictable funding source than general taxation, and has ancillary benefits as well.
“Low-income people are more price sensitive, raising the tobacco tax disproportionately causes low-income people to quit or cut back.”
First, several studies have shown that low-income people DO NOT cut back when tobacco taxes go up. Here’s an article about one of them:
http://abcnews.go.com/Health/CancerPreventionAndTreatment/story?id=3542982&page=1
Second, if higher taxes cause people to quit, then the tax won’t generate enough revenue to accomplish the ostensible goal.
Hi,
Very good and use full information about the long term care insurance. I was surfing since long time for some good information about the long term care insurance at last i got it. This is a very good job keep it up. According to me every one should tie up with long term care insurance for there safety in there coming future.
MedBlog Power 8
4/30/2008 – 5/7/2008Next revision: 5/7/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
MedBlog Power 8
4/30/2008 – 5/7/2008Next revision: 5/7/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
MedBlog Power 8
4/30/2008 – 5/7/2008Next revision: 5/7/2008
(Key: Rank, Blog name, Last week’s rank, Post of note)
So are Women smoking cigarettes sexy? To this question there where several different answers, but generally one significant answer, it was noted that lots of men saw Women smoking cigarettes much more sophisticated, and therefore much more attractive, since those women seem in control of everything, they seem to have everything on their palm, and it is incredibly attractive for several men to see a woman who seems demanding and hard to get.
I really like your blog. Health care reform should be publicized more and more to provide a platform for all to continue to have a good standard of living. I completely agree with the fact that health care reform must respect life and should include provisions to encourage the treatment of the chronically ill, or the permanently disabled. There are many health care and assisted living residences out there, and many are actually very good. I came across a website http://www.devonhouseassistedliving.com/index.htm for DevonHouse, which has been providing assisted living in the Lehigh Valley PA for a very long time. This assisted living facility offers professional nursing care in a home-like setting, spiritual and educational opportunities, and exceptional private and companion accommodations.