Ten Miles Square


November 19, 2012 9:50 AM Taxing Things that Are Bad for Us

By Aaron Carroll

I still get an earful for my skepticism that banning, or even taxing, sugar-laden soft drinks will do much to improve our health. In the interest of being fair on this issue, I want to shine a little light on two reports I saw out of the RWJF this morning. The first has to do with taxes on tobacco in NYC, on a study that appeared in PLOS ONE recently:

Background: To illustrate the burden of high cigarette excise taxes on low-income smokers.

Methodology/Principal Findings: Using data from the New York and national Adult Tobacco Surveys from 2010-2011, we estimated how smoking prevalence, daily cigarette consumption, and share of annual income spent on cigarettes vary by annual income (less than $30,000; $30,000-$59,999; and more than $60,000). The 2010-2011 sample includes 7,536 adults and 1,294 smokers from New York and 3,777 adults and 748 smokers nationally. Overall, smoking prevalence is lower in New York (16.1%) than nationally (22.2%) and is strongly associated with income in New York and nationally (P<.001). Smoking prevalence ranges from 12.2% to 33.7% nationally and from 10.1% to 24.3% from the highest to lowest income group. In 2010-2011, the lowest income group spent 23.6% of annual household income on cigarettes in New York (up from 11.6% in 2003-2004) and 14.2% nationally. Daily cigarette consumption is not related to income.

Conclusions/Significance: Although high cigarette taxes are an effective method for reducing cigarette smoking, they can impose a significant financial burden on low-income smokers.

A few things to note here. From 2003 to 2010, the percentage of adults in NYC who smoke dropped 28%, compared to a drop in the national rate of only 11%. In high school students the drop was 38% in NYC, compared to a national drop of only 17%. It’s also not just taxes; NYC has some of the most restrictive smoking laws in the country. But, they do appear to be working.

The second is a report from the RWJF themselves, “Does Curbing Tobacco Use Lower Health care Costs?”:

  • Tobacco use is the leading cause of preventable death in the United States and costs the nation $96 billion annually in health care costs and an additional $97 billion in lost productivity.

  • Tobacco prevention and cessation efforts, especially well-funded and comprehensive programs, are proven to reduce tobacco use and lower associated healthcare costs, providing a strong return on investment (ROI).

  • Despite revenue streams from tobacco use and high ROIs, the most successful prevention programs have been cut repeatedly over the past five years.

I still think there are differences between cigarettes and soft drinks. In the case of the former, smoking tobacco is what we are really targeting. In the case of the latter, what we’re after is sugar, and that nutrient can be obtained in many, many other forms which are ignored. Moreover, what we’re really after is obesity, and maybe we should be thinking that fat consumption has something to do with that, too.

[Cross-posted at The Incidental Economist]

Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.
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  • Peter C on November 19, 2012 3:12 PM:

    In general, I'm opposed to the principle of 'sin taxes'; they promote the idea that taxes are punishment. I'd prefer we think of taxes as just the way our society pays for the things we want. If everyone thought of taxes that way, we'd have fewer wars and healthier lives.

    On the other hand, cigarette taxes and carbon taxes are a way of enlisting the power of market economics to influence behavior. Such influence is very helpful to combat the very real problems of lung cancer and global warming - problems which may well need all the help they can get.

    Still, in my opinion, I think bottle deposit laws were not as effective at combatting litter and promoting recycling as my daughter's earnestness on the subject as a pre-schooler. Her Montesorri School stressed recycling in a way which galvanized the whole family as well as her grandparents. So, appeals to 'civic morality' can be as effective as economic incentives when they are made with care.

    The 'big soda ban' just seems intrusive and silly to me. What was far more effective (in my opinion) was my dentist's display of an empty Mountain Dew bottle that had in it the equivalent amount of table sugar. That was shocking enough to change my perspective on the harmfulness of soda.

  • paul on November 20, 2012 8:37 AM:

    Maybe we should call "sin taxes" something else. But it does seem like basic economics to try and recapture at least some of the cost certain products impose on society.

  • Objective Dem on November 20, 2012 1:43 PM:

    I understand the issues with the term "sin taxes." They are really a form of user tax but without the immediate nexus.

    Hazel Henderson developed the term "green taxes" which calculated the long term environmental costs of certain activities and then taxed them accordingly.

    One idea is to call the taxes "Health taxes"