I have reason to believe that society as a whole detests smokers based on fallacious economic reasoning. In the words of a friend: ìI donít want my tax money to be allocated towards cleaning the lungs of some obese smoker.” This is the typical standpoint of nonsmokers against smokers. Bean-counting accountants will blithely agree with that logic and blindly support raising taxes on tobacco products; however, an economist has reason to disagree on multiple grounds.
First, it is worth noting that all private health insurance companies charge smokers higher premiums to recoup the extra health costs incurred due to smoking. Hence, smokers pay for the extra burden they pose on healthcare and cannot be reprimanded for being a burden on the economy owing to their deteriorating health.
Second, and more importantly, the American Lung Association indicates that smokers on average die seven years earlier than nonsmokers, meaning they pay for Social Security and private pension funds for their working lives but do not live long enough to collect the accumulated benefits. In 2001, the United Press International published an article called ìCzechs Puff Away to the Benefit of State Coffers,” which indicated that the net benefit of smoking to the Czech government, after accounting for taxes on cigarettes and extra health costs, was $148 million. Therefore, society clearly cannot reprimand smokers on economic grounds and use it as a justification to heavily taxing cigarettes.
Third, contrary to popular belief, heavily taxing tobacco products is not a win-win solution for governments. Advocates of increasing tax on cigarettes argue that increased taxation reduces healthcare costs (as tobacco consumption decreases) and increases revenue for the government. However, on the darker side, tax increases create an incentive for people to smuggle cigarettes into the country. Upon my recent visit to Devon Street in Chicago, I was intrigued to discover that shop owners were selling Gold Leaf and Benson & Hedges (British cigarette brands) for prices as low as three dollars per pack. One shop owner shared some inside information about his business. On average, he sold more than 350 packs of illegally imported British cigarettes every month and made a profit of about $700. Interestingly, he was not the only one involved in this business. As a result, the U.S. tobacco industry loses sales, the government loses revenue and eventually, the consumers lose out. This is a typical example of a black market that develops as a result of tax hikes.
Lastly, it is a matter of double standards to heavily tax cigarettes without imposing the same taxes on alcoholic beverages. In 2006, alcohol abuse accounted for 22,073 deaths along with 13,050 newly reported cases of liver ulcers. Clearly, the government should be more concerned about alcoholism rather than tobacco addiction. Nonetheless, the tax on a pack of cigarettes, in purely monetary terms, is the same as the cumulative tax imposed on 60 bottles of beer.
Manifestly, the governmentís policies are shaped by factors other than statistical information and health consequences. To me, it seems like the lobbyists for Jack Danielís and SKYY Vodka have been more successful than the lobbyists for Philip Morris U.S.A.
Usman Gul is a regular contributor for the Voice. He can be reached for comment at UGul13@wooster.edu.
