New Study: Raising Cigarette Taxes Reduces Smoking Significantly [Updated]
Michael Nutter is trying to impose a cigarette tax in Philadelphia to help pay for a school budget shortfall. (The bill has passed; he’s waiting for approval from Harrisburg.) So does Obama, to help pay for pre-K education. Parsing Obama’s plan, which would raise prices by $1 per pack, the left-leaning Center onBudget and Policy Priorities has determined that even a 10% increase in cigarette pack prices is a significant deterrent for consumers.
Nutter’s plan would impose a $2/pack levy, resulting in a per-pack price increase of more than 30%. (The administration says the average price in Philly is $5.85.) Given the data above, you can do the math, and extrapolate the potential smoking decrease in Philly. Nutter has touted both the public health benefits and the fiscal benefits of the tax, but it seems that with such a substantial price increase, you can’t have it both ways: If you deter enough people from smoking, well, you won’t collect the revenue you set out to.
Update: A spokesperson for the mayor has pointed out that the Mayor’s proposal takes reduced revenues into account, precisely because of the deterrent nature of the tax. Over the course of the city’s five-year projection, it expects to reduce the city’s adult smoking population–currently at 280,000–by 41,000. So while it projects it can collect an additional $87 million in Fiscal Year 2015, that number would decrease to $77 million in FY 2018. Based on the amount of the increase, that five percent rate seems to jive with the CBPP projections above.
Side note: From a public health standpoint, this tax seems great. Even if it doesn’t accomplish its fiscal goals, the city is helping combat a deadly disease. What’s impossible to know, of course, is whether smokers will simply drive out of the city and buy in bulk instead of quitting or cutting back. Or whether they’ll tap into the fearsome black market Wawa is so worried about.