Becker's Cigarette Tax Numbers Need Recrunching
In "Warning: A higher cigarette tax may be hazardous to health financing" (Economic Viewpoint, Aug. 15), Gary Becker claims a cigarette-tax increase is a bad idea because it will discourage too many people from smoking to raise significant revenue. He predicts that a $1-a-pack increase would raise $3 billion a year in new revenue. This prediction is so far outside the economic mainstream that it cannot be taken seriously.
The Congressional Joint Committee on Taxation, the Congressional Budget Office, and the Treasury Dept. all estimate that a $1 increase would reduce smoking by about 20% and raise $12 billion to $13 billion in new annual revenue. These figures are confirmed by the work of 26 independent economists convened by the National Cancer Institute, as well as by Massachusetts Institute of Technology economist Jeffrey Harris.
But give Becker the benefit of the doubt. He claims that a $1 tax increase will reduce smoking by 70%. That would mean 32 million fewer smokers in the U.S. and about 8 million premature deaths averted among Americans alive today. It would save $35 billion a year in health-care costs, including $15 billion paid for by the taxpayer. Wouldn't [that] make sound policy?
Dr. David S. Rosenthal
Harvard University Health Services