Cigarette Taxes Backfire
Increasing the federal excise tax on cigarettes by 50 cents per pack would eventually increase Medicare and Social Security spending, because smokers would be healthier and live longer, according to a Congressional Budget Office report released Wednesday.
The report found that the tax increase would create short-term deficit reductions. However, by 2085, the costs associated with individuals living longer and consuming more Medicare and Social Security services would outweigh the health benefits and tax revenues, causing the deficit to increase slightly.
Source: California Health Line.
This is something that could be featured in the sequel to the documentary ‘Freakonomics’.
By 2085, there will still be smokers. I feel like there always will be, especially cigar afficianados like me. The fanatical public health czars aren’t going to win the war against tobacco – they’re just going to create unintended consequences while fighting it, and maybe help a few people live longer.
I agree with Brian. There will always be smokers. This is the double-edged sword of the welfare state. You discourage pople from smoking, then you get them to live longer so they end up costing you more. The more you tax the less people smoke and your expenses will go up in the long run.
I’ve always thought that Social Security and Medicare should provide a portion of enrollee benefits in kind. Cigarettes would be a great investment for them. I’m glad the CBO is finally making policy makers aware of this fact.
Maybe federal law should be changed to require that all cigarette taxes should accrue to the Social Security and Medicare Trust Fund. The amount of taxes extracted should be exactly equal to the additional costs of making people healthier.
@Buster – That sounds like a good idea, but a lot of states use cigarette money to plug their budget problems.
The whole issue just shows the deeper structural flaws in the system.
When you tax someone who smoke and then pass laws forbidding them from smoking almost everywhere, you’re going to see your revenue decrease. This holds true with Medicare and Social Security are brought into the mix: living longer means higher expenses, and less smoking means less income.
Simple reason seems to have eluded the makers of these laws.
Something else I want to add – sin taxes are a philosophically flawed idea. I don’t support them in theory nor in practice
Also, keep in mind that when governments put enormous taxes on cigarettes (i.e. in the U.K. and in New Zealand) it creates a black market. You can’t blame people.
Also, real cigars need to be exempt from the tax.
*Real* cigars don’t have the additives and poisons in them that cigarettes have.
@Brian – Is it really a sin tax, or is it the government trying to fulfill its responsibility in protecting the lives of its citizens? Not that I disagree with you, just for the sake of argument.
People that support legislation authorizing such a tax will get on board because they hate smoking and they hate smokers. Even if it is not technically a sin tax and even if the real reasons for the legislation are rooted in the need to pay for entitlements and healthcare, such legislation would still have the effect of a sin tax and would make the pro-control crowd happy.
Agreed, and that also speaks to the flawed view of “tolerance” our society has adopted. Only certain people are critiqued for being intolerant, the rest simply yell until they get their own way. For example, no one is ever critiqued for not being tolerant of another person’s decision to smoke, even if that smoking in no way affects them.
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