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Three Reasons Why Obama’s Cigarette Tax Hike Makes Sense

President Obama’s proposal to raise the federal tobacco tax to pay for expanded early childhood education hasn’t gotten much attention but, as our new paper explains, it would cut the number of premature deaths due to smoking and raise an estimated $78 billion over ten years to improve access to high-quality pre-kindergarten programs.  No wonder the Washington Post’s Ezra Klein called it one of the best ideas in Obama’s fiscal year 2014 budget.

Here are three reasons why it deserves Congress’s support:

  1. Image
    Cigarette smoking is the leading cause of preventable disease in the United States. It accounts for about 443,000 deaths each year, or about 20 percent of all deaths — some 50,000 of them from secondhand smoke.
  2. Tobacco taxes are a proven strategy to reduce smoking, especially among younger people, and extend lives. As the graph shows, a 10 percent rise in cigarette prices will reduce smoking by 5-15 percent among people under age 18 and by 3-7 percent among adults, the Congressional Budget Office estimates.  Cutting consumption among young people is especially important:  four in five adult smokers started before they were 18.
  3. Health benefits for low-income people would more than compensate for the regressive tax increase. Some opponents argue that raising tobacco taxes would unfairly affect low-income people since they have higher smoking rates. But low-income people would also benefit more from the health improvements from cutting consumption, since they smoke more and are more likely than better-off people to stop smoking (or not start) if tobacco taxes rise.  Lower-income families would also benefit more from the expanded access to early childhood education that these tax revenues would finance.
Chuck Marr
Vice President for Federal Tax Policy