Who Needs Gum And Patches?Gene Koretz
The Clinton Administration's proposed 75 cents-per-pack increase in the federal cigarette tax isn't likely to be revived soon, but that hasn't stopped economists Frank Chaloupka and Henry Wechsler from calculating its impact on smokers. Their recent National Bureau of Economic Research study based on a 1993 survey of U.S. college students concludes that the tax hike (if fully passed on to smokers) would have cut smoking among students by 30%.
Factoring in the price responsiveness of all young smokers, the researchers figure that the tax hike would have reduced the number of smokers aged 18 through 24 by more than 1.8 million. It would also have cut eventual smoking-related premature deaths in this group by more than 450,000.
The two economists also find that such a tax hike would lead to large increases in tax revenues, since the smoking population is dominated by older smokers whose habits are less sensitive to price. Although tax receipts would eventually decline, they find that the current tax rate is well below the level producing the highest long-run tax take.