Title

Raising Taxes to Reduce Smoking Prevalence: A Simulation of the Anticipated Health and Economic Impacts

Document Type

Article

Abstract

Objective

To estimate health and economic outcomes of raising the excise taxes on cigarettes.

Methods

We use a dynamic computer simulation model to estimate health and economic impacts of raising taxes on cigarettes (up to 100% price increase) for the entire population of the USA over 20 years. We also perform sensitivity analysis on price elasticity.

Results

A 40% tax-induced cigarette price increase would reduce smoking prevalence from 21% in 2004 to 15.2% in 2025 with large gains in cumulative life years (7 million) and quality adjusted life years (13 million) over 20 years. Total tax revenue will increase by $365 billion in that span, and total smoking-related medical costs would drop by $317 billion, resulting in total savings of $682 billion. These benefits increase greatly with larger tax increases, and tax revenues continue to rise even as smoking prevalence falls.

Conclusions

Increasing taxes on cigarettes is a unique policy intervention that reduces smoking prevalence, generates additional tax revenue, and results in significant savings in medical care costs.

Disciplines

Economics | Health Policy | Medicine and Health | Taxation

Permissions

Use Find in Your Library, contact the author, or use interlibrary loan to garner a copy of the article. Publisher copyright policy allows author to archive post-print (author’s final manuscript). When post-print is available or publisher policy changes, the article will be deposited

Publisher Citation

Sajjad Ahmad, Gregor A. Franz, Raising taxes to reduce smoking prevalence in the US: A simulation of the anticipated health and economic impacts, Public Health, Volume 122, Issue 1, January 2008, Pages 3-10, ISSN 0033-3506, 10.1016/j.puhe.2007.02.020. (http://www.sciencedirect.com/science/article/pii/S003335060700087X)