Cigarette Tax Would Cost Federal Government in Long Term

Initial drop in spending to 2021, but increased longevity would ultimately increase spending

WEDNESDAY, Nov. 28 (HealthDay News) -- A theoretical additional federal excise tax on cigarettes would lead to greater federal outlays over time because of the population's increased longevity, according to a perspective piece published in the Nov. 29 issue of the New England Journal of Medicine.

James R. Baumgardner, Ph.D., from the Congressional Budget Office in Washington, D.C., and colleagues modeled a hypothetical policy of increasing federal excise tax on cigarettes by 50 cents per pack to reduce smoking.

The researchers found that, by discouraging people from smoking, the higher excise tax would enhance the average health status of the population. Because of the policy, by 2021, almost 1.4 million adults would be nonsmokers, including approximately 10,000 adults who would not otherwise have survived to that time point. Over time, the effects of the policy on the health and longevity of the population would increase due to the continuing improvement in health for people who stopped smoking; a reduction in the proportion of the population that took up smoking; and the cumulative effects of lower death rates. From 2013 to 2021, lower health care spending per capita would correlate with a reduction in federal outlays totaling $730 million, while during the second decade, federal spending would be higher, and this effect would continue through the end of the analysis in 2085. Revenues would also be affected by the policy, with additional cigarette tax receipts and higher income-tax and payroll-tax receipts from people who worked longer or were more productive; this revenue would increase over time.

"Consequences for the federal budget are only one factor that lawmakers may consider when developing policies to promote health," the authors write.

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