Can A Tobacco Tax Benefit Lower-Income Groups?

A recent publication by the Campaign for Tobacco-Free Kids claims that federal cigarette taxes aren’t regressive because they actually benefit low-income people more than high-income people. Why? “Higher smoking rates among lower-income groups means they are now suffering the most from smoking and will, consequently, benefit the most from any effective new measures to reduce smoking,” namely higher Federal cigarette taxes. The group sites a study done by the Center for Disease Control proving these results. While the results seem valid, I think there is still another side to this story.

There are many social and health-related benefits that can come from a tobacco tax. Some adults may choose to quit, many children may choose not to start, and as a result these people and others perhaps, will have improved health. Most would agree these are desirable outcomes. However, the issue remains that these lower income groups are the ones being essentially forced to bear the costs, whether “costs” entail additional taxes or changing their behavior. They are giving something up, more so than higher income groups and this is still somewhat regressive. This also opens another can of worms about whether it’s paternalistic or not to have the government dictate what level of health every individual ought to attain, which is beyond our scope for the time being.

If a tobacco tax was put in place to change smoking behavior in the first place, fine; you can argue about whether this is correct for moral reasons. But this tax is being put on to raise money for a social program, with the side effect of decreasing smoking. The tax is regressive if you exclude the unintended effects, and probably still regressive if you include the unintended effects. The bottom line is, any type of progressive tax is always going to be the superior way to fund a program. You can choose to support the tax because it can cause good things to happen, but don’t be mislead into thinking that having these good things absolves any negative consequences.

For previous blog discussion about the cigarette tax and SCHIP see April 6 and April 23.