Lessons from the United States
Experience with Tobacco Taxes
Jason Furman
Senior Fellow, PIIE
The World Bank Group
Washington, DC
April 19, 2017
Peterson Institute for International Economics | 1750 Massachusetts Ave., NW | Washington, DC 20036
Nearly 25 Percent of Deaths in the United States
Were Attributable to Tobacco in 2004
Share of Deaths Attributable to Tobacco, 2004
Percent of Deaths from All Causes
25
20
15
10
5
0
Note: For population 30 years of age and older. Americas excludes the United States.
Source: World Health Organization; author’s calculations.
The United States Accounted for an Outsized
Share of Deaths Attributable to Tobacco in 2004
Share of Global Deaths, 2004
Percent of Global Deaths
30
Tobacco Deaths
25
All Deaths
20
15
10
5
0
Note: For population 30 years of age and older. Americas excludes the United States.
Source: World Health Organization; author’s calculations.
Smoking Rates Have Fallen Particularly Fast in the
United States
Smoking Prevalence by Country Income, 1980-2012
Percent
35
2012
30
High Income
25
Middle
Income
20
United
States
15
10
Low Income
5
0
1980
1985
1990
1995
2000
Note: Data are a population-weighted average within each group. High income excludes the United States.
Source: Institute for Health Metrics and Evaluation; author’s calculations.
2005
2010
Many Countries Have Seen Reductions in
Smoking, Especially Higher-income Countries
Smoking Prevalence by Country, 1980 and 2012
Smoking Prevalence, 2012 (Percent)
50
High Income
Middle Income
40
Low Income
China
Russia
30
20
Canada
10
India
United
States
0
0
Source: Institute for Health Metrics and Evaluation.
10
20
30
40
Smoking Prevalence, 1980 (Percent)
50
Smoking Rates Have Fallen Sharply for U.S.
Women and Men Since 1980
Smoking Prevalence, 1980 and 2012
Percent
45
1980
40
2012
35
30
25
20
15
10
5
0
Female
Male
United States
Source: Institute for Health Metrics and Evaluation.
Female
Male
World
U.S. Cigarette Taxes Are About Average Compared
with the Rest of the World, but Lower Than Other
High Income Economies
Estimated Cigarette Excise Taxes as a Percent
of Price of Most Sold Brand, 2014
Taxes as a Percent of Price
60
50
World Average
40
30
20
10
0
United States
High Income
Middle Income
Note: Data are a population-weighted average within each group. High income excludes the United States.
Source: Tobacco Free Initiative; author's calculations.
Low Income
Cigarette Taxes Vary Widely Across States
Combined Federal and State Cigarette Taxes per Pack, 2014
$1.18-$1.61
$1.63-$2.04
$2.16-$2.67
$2.71-$3.53
$3.63-$5.36
Note: The Federal cigarette tax is $1.01 per pack.
Source: Orzechowski and Walker (2015).
Overall Age-Adjusted Death Rates Have Fallen
Sharply Since the 1950s, but the Decline for Lung
Cancer is More Recent
Source: CDC (2016); Council of Economic Advisers.
Lesson #1: Smoking Plays A Major Role in Both
Mortality and Inequality of Mortality
Source: NHIS and CEA calculations following Currie and Schwandt (2016).
Lesson #2: Price Plays an Important Role in
Smoking
Source: Orzechowski and Walker (2015); Bureau of Labor Statistics; CEA calculations.
Lesson #3: Cigarette Taxes Play an Important Role
in Cigarette Prices
Source: Orzechowski and Walker (2015); Bureau of Labor Statistics; CEA calculations.
Lesson #4: Cigarette Taxes Have Large Aggregate
Benefits for Public Health
Source: van Hasselt et al. (2015); Council of Economic Advisers.
The 2009 Cigarette Tax Increase Could Have
Plausibly Reduced the Number of Smokers in a
Cohort of 18 Year-olds by 45,000-220,000 People
Note: Lower estimate for van Hasselt et al. (2015) is based on results for 18-25 year-olds; higher estimate is based on results for 12-17 year-olds.
Source: Huang and Chaloupka (2012); van Hasselt et al. (2015); CBO (2012); Carpenter and Cook (2008); CEA calculations.
And Reduced the Number of Premature Deaths
Due to Smoking by 15,000-70,000 per Cohort
Note: Lower estimate for van Hasselt et al. (2015) is based on results for 18-25 year-olds; higher estimate is based on results for 12-17 year-olds.
Source: Huang and Chaloupka (2012); van Hasselt et al. (2015); CBO (2012); Carpenter and Cook (2008); CEA calculations.
Lesson #5: Tobacco Taxes Disproportionately
Benefit Lower-Income Households
Note: The illustrative distribution is computed by allocating the burden of tobacco taxes according to the distribution of tobacco taxes reported in Rosenberg (2015), allocating
$37.5 billion in health benefits proportional to the tax burden, allocating a $9.4 billion utility offset proportional to the health benefits (and thus also proportional to the tax burden),
and allocating CHIP benefits equal in value to the tax increase proportional to the distribution of children with CHIP coverage in the March CPS.
Source: CEA calculations.
Lesson #5: Tobacco Taxes Disproportionately
Benefit Lower-Income Households
Note: The illustrative distribution is computed by allocating the burden of tobacco taxes according to the distribution of tobacco taxes reported in Rosenberg (2015), allocating
$37.5 billion in health benefits proportional to the tax burden, allocating a $9.4 billion utility offset proportional to the health benefits (and thus also proportional to the tax burden),
and allocating CHIP benefits equal in value to the tax increase proportional to the distribution of children with CHIP coverage in the March CPS.
Source: CEA calculations.
Lesson #5: Tobacco Taxes Disproportionately
Benefit Lower-Income Households
Note: The illustrative distribution is computed by allocating the burden of tobacco taxes according to the distribution of tobacco taxes reported in Rosenberg (2015), allocating
$37.5 billion in health benefits proportional to the tax burden, allocating a $9.4 billion utility offset proportional to the health benefits (and thus also proportional to the tax burden),
and allocating CHIP benefits equal in value to the tax increase proportional to the distribution of children with CHIP coverage in the March CPS.
Source: CEA calculations.
Lesson #5: Tobacco Taxes Disproportionately
Benefit Lower-Income Households
Note: The illustrative distribution is computed by allocating the burden of tobacco taxes according to the distribution of tobacco taxes reported in Rosenberg (2015), allocating
$37.5 billion in health benefits proportional to the tax burden, allocating a $9.4 billion utility offset proportional to the health benefits (and thus also proportional to the tax burden),
and allocating CHIP benefits equal in value to the tax increase proportional to the distribution of children with CHIP coverage in the March CPS.
Source: CEA calculations.
Lesson #6: It Is Really Important To Tax Similar
Tobacco Products at Similar Rates
Source: Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau; Council of Economic Advisers.
High Levels of Substitution Between Different
Types of Tobacco
Source: Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau; Council of Economic Advisers.
Lessons from the United States
Experience with Tobacco Taxes
Jason Furman
Senior Fellow, PIIE
The World Bank Group
Washington, DC
April 19, 2017
Peterson Institute for International Economics | 1750 Massachusetts Ave., NW | Washington, DC 20036