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Tobacco Taxes Work, But Only If They’re High

When smoking costs more, more people quit. That’s why higher cigarette taxes are almost always good policy, for smokers and the public health, too.

There’s a catch, though — and it’s one that voters in four states should keep in mind as they consider ballot initiatives next month to raise cigarette taxes: Sin taxes work only if they’re high enough.

Voters in California, Colorado and North Dakota are being asked to raise state taxes to well over US$2 a pack. Then there’s Missouri, where voters will choose from two increases so meager that they make a mockery of the very idea of sin taxes.

Properly calibrated, tobacco excise taxes can be a powerful weapon against smoking and the disease and death it brings. Raising taxes enough to boost the price per pack by 10 percent lowers adult consumption by 3 to 5 percent. Among teenagers, consumption falls 6 to 7 percent.

This effect is especially pronounced among lower-income smokers — the upside of imposing such a regressive tax. And it’s made even stronger if some of the tax money is invested in public-health efforts to help people quit, as the California initiative (which is supported by Michael R. Bloomberg) would do.

Substantial cigarette taxes also generate revenue, of course, but this is a secondary benefit. It’s never enough to cover the high costs that states incur from tobacco use, in the form of Medicaid expenditures, for example, and lost productivity. Ideally, in fact, as more smokers quit, revenue from a cigarette tax should gradually diminish.

The World Health Organization says taxes should amount to 70 percent of the price of a pack of cigarettes. No taxes in the U.S. are that high, though in some cities they come close. In Chicago, the various taxes on each pack — federal, state, county and city — amount to about 60 percent of the $12 price, and public health officials say this has helped lower the smoking rate.

If California’s ballot measure passes, the state tax per pack will rise to $2.87, from 87 cents. In Colorado it will go to $2.59, up from 84 cents, and in North Dakota, to $2.20 from 44 cents. There are a couple of drawbacks: Revenue from the North Dakota tax would not be used to fund any efforts to help people quit smoking. In Colorado, electronic cigarettes would be exempt. But in all three states the increases are big enough to be worthwhile.

Missouri’s two proposals are not. And neither — one would raise the state tax to 40 cents, from 17; the other to 77 cents — would be used to fund anti-smoking efforts. So it’s not surprising tobacco companies support both proposals, and public health organizations oppose them. They seem designed not to lower Missouri’s smoking rates, but to discourage the state from ever raising taxes high enough to make a difference.

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