ENDING TOBACCO WITH TAXATION 1
ENDING TOBACCO WITH TAXATION 4
Ending the Demand for Tobacco with Taxation
Ending the Demand for Tobacco with Taxation
Ever since the US surgeon general's report that was published in 1964 revealed the health risks that are related to tobacco use, ending the demand for tobacco has been a goal that governments across the globe have been pursuing. At what cost has been the issue with this endeavor because of the huge revenues that tobacco produces for the companies, as well as the governments. The World Health Organization (WHO) organized the Framework Convention on Tobacco Control (FCTC) treaty that was put into effect in 2005 and called for more stringent regulations on tobacco companies and increasing taxation on tobacco as well as to reduce tobacco consumption (Roemer, Taylor, & Lariviere, 2005). The WHO FCTC is still active, and many studies have followed that have shown how the demand for tobacco can be stopped through the process of taxation.
Literature Review
A study in New Zealand performed by Cobiac, Ikeda, Nghiem, Blakely, and Wilson (2015) revealed that with a continued commitment to annual 10% increases in tobacco excise tax, smoking prevalence was projected to fall from 15.1% in 2013 to 8.7% by 2025. This is compared to 9.9% without any further tax rises. With annual tax increases of 20%, the prevalence is projected to fall to 7.6% by 2025 (Cobiac et al., 2015). The results show significant decline in usage and continued growth in revenue of $10.4 billion when applying the 20% annual tax for 2025.
A similar study was performed on a global scale and involved data from 181 countries. Goodchild, Perucic, and Nargis (2016), used a model to study the effects of a tax increase of 42% to the mean retail price of cigarettes. Taking the average price from 3.20 to 4.55 international dollars (I$) per 20-cigarette pack. Prevalence of smoking would fall by 9% resulting in 66 million fewer smokers and 15 million fewer smoking-attributable deaths. Cigarette excise revenue would increase by 47%, from 402 billion to 593 billion I$, which gives an extra 190 billion I$s in revenue (Goodchild, Perucic, & Nargis, 2016).
These studies show steady growth in revenue while also decreasing the demand for cigarettes overall. A Washington Post article published in 2011 looked at the economy if the demand for tobacco ended. It notes that health costs would decrease by $211 billion by 2025 if everyone would’ve stopped smoking in 2006. Public programs would be affected by this as well with Medicaid costs decreased by lower-income populations not having the need for more medical care because of their prowess to smoking. However, states would lose revenue from cigarette excise taxes, which totaled $13.75 billion in 2006. “If Americans stopped smoking altogether, states could see a 1.4 percent decrease in revenue. end of smoking means a slight, 1.58 percent increase in Social Security outlays” (Kliff, 2011). Results like these g...
