Source
Department of Civil and Environmental Engineering, University of Nevada, 4505 Maryland Parkway, Las Vegas, NV 89154-4015, USA. sajjad.ahmad@unlv.edu
Abstract
OBJECTIVE:
To estimate health and economic outcomes of raising the excise taxes on cigarettes.
METHODS:
We use a dynamic computer simulation model to estimate health and economic impacts of raising taxes on cigarettes (up to 100% price increase) for the entire population of the USA over 20 years. We also perform sensitivity analysis on price elasticity.
RESULTS:
A 40% tax-induced cigarette price increase would reduce smoking prevalence from 21% in 2004 to 15.2% in 2025 with large gains in cumulative life years (7 million) and quality adjusted life years (13 million) over 20 years. Total tax revenue will increase by $365 billion in that span, and total smoking-related medical costs would drop by $317 billion, resulting in total savings of $682 billion. These benefits increase greatly with larger tax increases, and tax revenues continue to rise even as smoking prevalence falls.
CONCLUSIONS:
Increasing taxes on cigarettes is a unique policy intervention that reduces smoking prevalence, generates additional tax revenue, and results in significant savings in medical care costs.