At $2 per pack, Maryland has one of the highest cigarette taxes in the nation — and has reaped considerable benefits from it. With every tobacco tax increase over the last 13 years, smoking rates in the state have declined, not only among children but with adults, too.
That's not only been good for the budget — the cigarette tax accounts for nearly $400 million in revenue annually for the state or 90 percent of all the tobacco- and alcohol-related taxes Maryland collects combined — but good for our collective health. Maryland adult smoking rates declined between 1998 and 2009 by 32.6 percent, or twice the U.S. average. That's a period of time that coincides with three major cigarette tax increases in the state.
Health officials estimate that the lower smoking rates translate into more than 70,000 lives saved in Maryland. The net effect on children is thought to be even greater than for adults, as young people are far more sensitive to price increases than older, more-established smokers.
All that is worth mentioning in light of a recent Congressional Budget Office report that looked into the potential effects of raising the federal excise tax on cigarettes from $1.01 per pack to $1.51. It should come as no surprise that researchers found the same benefits Maryland has experienced would also be felt on the national stage.
A 50-cent increase in the tax would help trim the deficit for the next 50 years and reduce costs to Medicaid and Medicare — and, since it would reduce mortality rates and improve health, Americans would be more productive and live longer, potentially working longer and paying taxes longer, too.
Tobacco companies are likely to raise a ruckus over any plan to increase the federal tax. Here's what they'll say: Cigarette taxes are regressive and hit poor and working families hardest. They are not a reliable source of revenue for government (as smoking rates decline, tax revenues do, too) and high taxes will only encourage smuggling.
To which we would counter: Yes, all of that is true, but those all-too-familiar objections pale in comparison to the prospect of saving hundreds of thousands of lives. According to one estimate, every 10 percent increase in cigarette prices reduces youth smoking rates by 7 percent and overall smoking rates by 4 percent.
If poor people are the first to abandon smoking because of high state and/or federal taxes, so much the better for them. That means they'll be the first to accrue the benefits of longevity and a better quality of life that come with kicking the habit. That seems like a win-win situation to us.
We would even go further and concede that Congress shouldn't pass the higher tax rate to reduce the deficit. In the long run, the impact on the national debt is negligible and perhaps even counterproductive. Why? The tax will still be collected, of course, but as people get healthier and live longer, the cost to Social Security will only increase to pay for the additional retirees.
As the CBO report notes, Social Security represents about one-sixth of all federal spending, so greater outlays for retirement are no small matter. But if that kind of bean-counting was the only consideration, the U.S. would be better of cutting off funding for such important government programs as cancer research, occupational safety and various forms of disease prevention — all of which lengthen the life spans of Americans, too.
Still, the report should be offered as a lesson to Congress that not all tax increases are bad for the economy. The effects of smoking are so harmful to human health that most anything government can do to reduce smoking rates, from higher taxes to smoking cessation programs and limits on tobacco advertising, are beneficial from most any perspective.
If Congress wants to reduce health care costs simply and cheaply, it could do a lot worse than pass a 50-cent-per-pack cigarette tax increase. The CBO estimates that people who do not smoke (but otherwise resemble smokers) spend about $1,000 less on health care each year than smokers do, and the savings are even greater if they are older than 64. That's the kind of budget cutting that all Americans should be able to support.