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Smokers: People or a Source of Tax Revenue

April 1, 2009

Brad Schiller argues in the Wall Street Journal (“Obama’s Poor Tax”) that Obama has broken his pledge not to raise taxes on 95% of Americans by tripling the federal excise tax on cigarettes.  Because the number of smokers fall as taxes increase, he thinks this is a move that will hurt states by reducing their income from state levied tobacco taxes.  Additionally, he thinks this tax shouldn’t be imposed because half of smokers are low income (25% qualify as “poor”).

I immediately had three thoughts:

  1. His argument boils down to the fact that we should keep people smoking for the tax revenue.  Is this really the country we want to be?  Yes, it’s your choice to smoke, but should we want more people to live shorter and unhealthier lives simply for a revenue stream?
  2. I don’t feel bad for people who will have to pay more for their cigarettes.  As far as I’m concerned, by purchasing cigarettes, you are accepting the tax burden—I don’t consider this raising taxes on the poor, I consider it an investment in the future health care of smokers. Especially if such a high percentage of these people are low income, we’ll (as a nation) likely be paying for their health care.
  3. He seems to be saying that they smoke because they are lower income, when in fact we could have a case of chicken and the egg.  One could argue that both a lower income and a tendency to smoke may come from another common factor like level of education (this is a statistical fact, I’m in no way saying if you smoke you’re unintelligent–even Obama was[is?] a smoker).  Or perhaps they are lower income because they spend massive amounts of money on their habit.  One article cites $5 as the average cost for a pack of cigarettes.  If you smoke a pack a day, that’s $1,825 per year for just the cigarettes, not including any indirect expenses (see this article for a fuller picture of the cost of smoking).  For a little perspective, 20% of Americans made under $19,000 in 2006.  A smoker in that 20% of Americans is spending 10% of their annual income on cigarettes.
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One Comment leave one →
  1. George permalink
    April 1, 2009 11:04 pm

    I think that tax policy has been terribly under utilized as a tool to incentivise a desired behavior. There will never be a laws preventing smoking or requiring that if you get lung cancer from smoking, you pay your own medical expenses. There only way you can put the medical costs onto the people responsible for creating them is to tax the cause of the disease.
    We should be taxing gas much more too- it would reduce it’s use, and get tax revenue that could be used to motivate alternate energy thinking.
    Another two-fer.

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