Smokers are doing society a favor Costs: Their early deaths lead to reduced medical expenses. They pay hefty per-pack taxes. Shouldn't the rest of us be saying, "Thank you for smoking"?

January 04, 1998|By Peter VanDoren

If a politician proposed a tax that disproportionately took money from the poor and minority citizens, how would most people react? Negatively, to say the least. But that's exactly what politicians in Washington and many state capitals are trying to do right now, and one listens in vain for denunciations of the idea. Why? Because the effort is cloaked in the abolitionist rhetoric of the anti-smoking lobby.

A little background. Conventional wisdom holds that nonsmoking taxpayers subsidize smokers through various public programs such as Medicare and Medicaid. Therefore, it's assumed that policy reforms that make smokers and tobacco companies pay money to state governments are sound public policy.

The only difficulty with this logical exercise is that the premise that nonsmokers subsidize smokers just isn't true.

Professor W. Kip Viscusi of Harvard Law School calculates that the extra health care costs of smokers are about 50 cents per pack of cigarettes. But smokers do not live as long as nonsmokers, and thus smokers create savings for taxpayers that usually aren't considered. Because smokers die earlier than nonsmokers, taxpayers save expenditures that otherwise would be made for pensions as well as nursing-home care and other costs related to old age.

When those savings are computed (at a 3 percent discount rate), they more than offset the costs that smokers create. Smokers actually save society about 32 cents per pack smoked. Not only do smokers save taxpayers money, smokers also pay an average of 53 cents per pack in federal and state taxes.

And given the approximately 30 billion packs of cigarettes smoked a year in the United States, smokers pay $15.9 billion more than would be necessary if we were to follow the principle that people should pay for the costs they impose on others. In effect, smokers pay taxpayers for the right to smoke, in addition to the savings they create for taxpayers by dying early.

While smokers create net benefits for the nation as a whole, does the picture change when viewed state by state? You'll hear state officials argue that tobacco taxes and pension savings accrue largely to the federal government, and therefore state attempts to recoup money from tobacco companies are justified. That sounds reasonable, until you look at the facts.

The highest cigarette-related health care costs of any state are in New York, where they come to about 7 cents per pack. But state pension and nursing-home savings offset those medical care costs and then some, so that New York actually benefits to the tune of about 34 cents per pack of cigarettes consumed.

And because New York has a very high state tax of 56 cents per pack, smokers pay a net amount of about 59 cents per pack for the right to smoke and not impose costs on others. Even in Virginia, which has the lowest tax of any state, 25 cents per pack, smokers pay about 10 cents more per pack than the costs they impose on taxpayers.

What happens if we consider only health care costs? Most people believe that a smoker-free society would have lower health care costs, and thus they approve of public policies, such as higher cigarette taxes, that reduce smoking. According to the surgeon general, the average lifetime, health care costs of smokers are greater than those of nonsmokers by about $6,000. But a recent article in the New England Journal of Medicine estimated that if every smoker quit today, health care costs would drop in the short run and climb higher in two or three decades because of the increased life span of ex-smokers.

Smokers shoulder a heavy government-imposed financial burden. Some of it they pay directly, through cigarette taxes. Some they pay indirectly, as in the proposed $368.5 billion liability settlement between the states and the tobacco companies, which will come out of the pockets of cigarette consumers. That burden is justified by neither the costs smokers create for others nor reduced health care costs.

Back to the point with which we began. How well off are the people who bear that burden? Families with incomes less than $30,000 a year earn only 16 percent of total income in the United States, but they pay about 47 percent of federal tobacco taxes. In addition, African-Americans are more likely to be smokers than are whites. Thus, absurdly heavy taxation of cigarettes hits hardest those who can least afford it, and it redistributes resources from poorer blacks to more affluent whites.

So why are politicians going after smokers and tobacco companies? For the same reason that Willie Sutton robbed banks: A lot of money is there. The 25 percent of the population that smokes is a convenient unorganized source from which the rest of the population can extract revenue. Taxing smokers because we can take their money easily is theft dressed up in good intentions.

Peter VanDoren is assistant director of environmental studies at the Cato Institute.

Pub Date: 1/04/98

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