The Congressional Budget Office just released a comprehensive new report investigating the budgetary effects of a hypothetical increase in the federal excise tax on cigarettes and small cigars from, $1.01 to $1.51 in fiscal year 2013. The report’s level of sophistication is unprecedented in its ability to evaluate the effects this change could have. Given the federal budget’s current state of affairs, perhaps the most significant finding from the analysis is that increasing the excise tax on cigarettes could reduce federal budget deficits by a total of about $42 billion through 2021. The value of the health costs and lives saved goes without saying.
Of course, the same could be said for some other products that can be harmful to health. Alcohol taxes also suppress consumption and reduce the harms associated with drinking, and thanks to inflation and the absence of indexing in state tax laws, they are generally now at real rates we had in the ’50s and ’60s. See Alex Wagenaar’s systematic review for more on the subject.
So, if a majority of Americans are seeing a need for revenue, why not raise it, in part, where the result will also include saved lives and saved health care costs?