Cigarette Tax Revenue

Unsure whether to put this in GD or here.

What if everyone stopped smoking and there was no cigarette tax revenue?

The tax shortfall would be shifted to other products, presumably (unhealthy foods, drinks etc.). But say, it took federal and state governments a while to wrangle things out. Who/what would be affected? Would incomes drop? state/federal services? cancer research? non-profits? What would be the overall affect of having to provide medical care for the newly non-smoking who are going to live 20 or 30 years longer than originally thought?

I don’t have much input regarding your other questions, but for this one I’m certain the cost of treating smoking related diseases outweighs the cost of living longer. Emphysema and cancer are fantastically expensive long-term money sinks that cost more to treat than typical life-ending problems like heart attacks and strokes.

ETA - Smoking related diseases pretty commonly affect people before retirement age, meaning smoking negatively affects the work force, and in many cases causes people to stop working earlier than they otherwise would have.

In This Thread on Smoking, a poster writes:

Which of you is correct?

Ever since I was a kid, I’ve thought sin taxes were kind of silly- once a municipality has the tax revenue coming in, they can never seem to do without it later on. Frankly, they probably hope that MORE people buy cigarettes, not fewer.

IIRC there was a study (my Google-Fu is failing me now) that showed smokers were about a net wash on cost to society. Yes they get smoker diseases and cost a lot of money. Thing is everyone dies and old people get old people stuff that is expensive and lasts a long time. Smokers die sooner is all (statistically). Then add in they pay substantial taxes. In Chicago (where I live) one pack of cigarettes can cost $10 or more (I forget but the actual cost is something like $3 or less so a 333% tax). Then add in smokers collect less Social Security since they tend not to live long enough to get much if any (although they paid in to it so the government keeps the cash).

Finally, I seem to recall the states suing the pants off tobacco so there are billions there in the state coffers.

No cite, but I’m generally aware from having worked in the benefits industry that smokers cost their employers significantly more in aggregate benefit costs than non-smokers – i.e. the additional healthcare costs are not offset by lower lifetime pension payments; not even close. And that calculation is just on benefits; doesn’t factor in the additional wage costs caused by the fact that smokers take more sick leave than non-smokers, or the loss of human capital when smokers retire early because of smoking-related medical conditions.

‘Course, employers don’t get the cigarette tax revenue, and the savings in social security payments when smokers die don’t accrue to them. Nor, on the other hand, do they suffer the income tax loss when smokers stop work earlier. All in all, I’d be very surprised indeed if smokers were a net financial benefit either to the community or to the government.

Ever do the same analysis for overweight people?

People who drink alcohol versus those that don’t?

Employees with children versus those that don’t?

People with a history of cancer in their family versus those that don’t?

OK, leaving aside someone who has already been diagnosed with a serious condition:

The biggest factor affecting your life expectancy is your age now.

After that, your sex.

After that, whether you are a smoker.

Of course, this is a bit of an oversimplification, since whether you report being a smoker is a simple binary – you do, or you don’t. Family history is also relevant to live expectancy – what age did your grandparents die, and what did they die of? - but it’s not a simple binary. And, when it comes to group insurance, such as employers arrange for health/pension purposes for their workforces, insurers want simple, classifiable, analysable data. As regards the more nebulous factors, they’ll take the rough with the smooth; risk-spreading is the whole point of group insurance. So (you’ll find) you’ll be asked to tick a box about smoking, but not necessarily to produce your grandparents’ death certificates.

If both of your parents, and all of your grandparetns, died of cardiovascular problems in their fifties, this is not a good indicator. Far from suggesting, though, that it doesn’t matter whether you smoke (and exercise) or not, it could suggest that it matters all the more. Because, of course, so far as life expectancy is concerned these are not indepent variables.

For the record, in response to the specific issues you raise, I think smoking matters more than whether you are overweight – at least, in terms of where insurers generally start to measure you as “overweight”. It also matters more than whether you drink (depending again on where the insurer draws the line). As to family history of cancer, it depends on the cancer. But of course bear in mind again that there are many cancers which are not independent variables with respect to smoking.

But, in the context of the present discussion, so what? The issue is not whether smoking is the worst possible lifestyle choice that you can make from the point of view of shortening your life and endangering your health, but the entirely different question of whether the taxes paid by smokers outweigh the financial costs that result from smoking.

[quote=“UDS, post:6, topic:518565”]

No cite, but I’m generally aware from having worked in the benefits industry that smokers cost their employers significantly more in aggregate benefit costs than non-smokers – i.e. the additional healthcare costs are not offset by lower lifetime pension payments; not even close. And that calculation is just on benefits; doesn’t factor in the additional wage costs caused by the fact that smokers take more sick leave than non-smokers, or the loss of human capital when smokers retire early because of smoking-related medical conditions.
QUOTE]

I must have worked in dramatically different companies than you. In the two companies where I have been involved in helping set the employee contribution rates, no one is doing these calculations on the company side. The insurance companies ask for smoker and non-smoker rates to set the premiums for the whole group. The company uses the “smoker surcharge” for the same purpose as the “spousal surcharge”. To get as many people to drop coverage as they can, and get onto their spouse’s plan or on to some kind of public plan. Smoking didn’t become dramatically worse for you in the last 10 years. Smokers became social pariahs in the last ten years, so socking them with a surcharge became much easier for companies to do.

And companies do not want to retail “human capital” for the most part. They are perfectly happy to lose the age 40+ workers if they can, especially if they have a pension plan, but even without it. Because for most workers productivity does not rise forever with experience, but salaries tend to. But there are laws against just replacing older workers with younger, cheaper ones.

Passing on costs to employees still affects employers, since employees are to a large extent incentivized by net pay, rather than gross. And it’s not just in the last ten years that the health/benefit costs of smoking have been recognised. This isn’t affected by the question of whether employers at different times have been willing to bear those extra costs, have tried to pass them on to employees, or have sought to avoid them by withdrawing coverage.

The bottom line is that, the more the workforce smokes, the more the benefits cost to provide, and this cost is material and is not offset by early deaths. This remains true regardless of how that cost is borne.

Often the comparison is smoker to someone who makes perfect health choices and lives a long, healthy life. The less than ideal versus the ideal.

And overweight people do not pay a sin tax on their Big Mac. Smokers pay a substantial sin tax.

And again, where did all those billions go every state extracted from the tobacco industry? However they squandered it I consider that to weigh on smokers paying their debt to society for their choice.

Certainly in the context that I am speaking of, the comparison is not against a hypothetical ideal. The comparison is between a real population of smokers and a real population of non-smokers.

Granted. This doesn’t mean, though, that the smoking taxes paid by smoker actually cover the costs to government (or society) that arise from their smoking. And, if it doesn’t, then government (or society) would be financially better off if they stopped smoking, which I think is what the OP is asking.

The fact that this may be even truer of those who make health-adverse choices which are not penalised isn’t really relevant.

Again, I don’t really think that addresses the issue raised by the OP. The question comes down to this; if smokers all stopped, would the long-term impact on public finances be positive or negative? The answer to that doesn’t depend on how tax revenues are spent, even if we assume that that can be identified. Expenditure items are not often sourced to a particular revenue item.

(It does depend, though, on how much the public authorities spend on healthcare and on pensions. The less healthcare the public authorities provide, the less they will save if people stop smoking.)