Hikes on tobacco taxes are an easy sell to voters because smokers are presumed to pass their health care costs on to society, creating a negative externality that non-smokers have to pay for. The actual budgetary impact of smoking is more complicated: Smokers, by dying earlier than those who abstain, save governments a considerable amount of money. There is a lot of research to back this up, the latest coming from the Congressional Budget Office in The New England Journal of Medicine. The CBO examined a hypothetical increase in federal cigarette taxes indexed to inflation:
Outlays would be lower in that initial phase because decreases in per capita health care spending would outweigh the costs of greater longevity. From about the middle of the second decade onward, however, the effects of increased longevity would outweigh decreases in per capita health care spending, and outlays would rise; but until about the mid-2060s, that growth in outlays would be more than offset by the increase in tax revenues from higher earnings. The largest deficit reduction from the health-related effects — about 0.005% of GDP annually — would occur from about 2030 to 2035. After the mid-2060s, the deficit would be larger than otherwise because the higher outlays would outweigh the health-related revenue increase.
Factoring in the additional excise tax revenues, the researchers project that a tax increase would nonetheless result in a very small reduction in the deficit. Absent those revenues, the federal government is made fiscally worse off by people quitting smoking or never taking it up in the first place.
Michael Siegel, who is usually good at dispassionately evaluating arguments on their merits, is furious:
The rest of the story is that it is despicable that the Congressional Budget Office believes that it is appropriate to evaluate a public health policy based on whether it might save lives and therefore increase Social Security and Medicare spending. In doing so, the CBO is borrowing a page right out of the tobacco industry’s playbook. This type of analysis would never be done for an issue such as mammography, because anyone who advanced such an argument would be raked over the coals.
Like Philip Morris, the CBO should disavow its report and apologize for the argument it advances.
Finally, while it is shameful that the CBO has advanced this argument, it is also shameful that the journal agreed to publish this argument, thus giving it legitimacy. Both the CBO and the journal owe readers and the public an apology.
There is an obvious difference between mammograms, which are a treatment, and taxes, which are involuntarily taken from consumers. Not everyone buys into the argument that smokers should be taxed for their own good. For many, the best case for cigarette taxes is that smokers shift health costs onto the state. The CBO study is relevant to that argument.
In any case, the CBO makes clear in its commentary that budget effects are only one factor that should be considered:
Consequences for the federal budget are only one factor that lawmakers may consider when developing policies to promote health. Others factors include effects on people’s health and well-being, views about the appropriate role of government in influencing behavior, the burdens that policies might impose on people in various circumstances, and effects on the budgets of state and local governments.
Emphasis mine. Siegel, while admirable for his advocacy against junk science in the anti-tobacco movement, often misses the mark on issues related to paternalism.