Monday, July 18, 2005

Challenging Dogma (Post #1): Tobacco Taxes are Not Always Appropriate Public Health Policy

Over the past months, I have come to realize that there are a number of dogmatic points that I was taught to believe as a tobacco control practitioner that are not necessarily appropriate. In this series, I will discuss some of them.

To start, I was generally taught that increasing cigarette taxes is an appropriate and important tobacco control intervention. It leads to decreased cigarette consumption, which will in turn save lives. Importantly, there were no qualifiers placed on this perspective. Any cigarette tax, in my experience, is generally viewed by tobacco control organizations and practitioners as being a good thing.

If you look at the Campaign for Tobacco-Free Kids, for example, you'll see an organization that seems to support any cigarette tax increase. The circumstances for the tax increase and the legislative intent in proposing the tax increase do not seem to matter at all. It seems that the Campaign has never met a cigarette tax increase that it didn't like.

In fact, I remember a number of years ago being asked to contribute to an effort by the Campaign to increase cigarette taxes in all the New England states. That's it (at least in my perception) - the goal was simply to increase the cigarette tax - for whatever purpose the states felt they could put the money to use.

According to the Campaign's website: "Increasing cigarette taxes is a WIN, WIN, WIN solution for states – a health win that reduces smoking and saves lives; a fiscal win that raises revenue and reduces health care costs; and a political win that is popular with the public."

To be fair, I'm just using the Campaign as an example. My perception is that most anti-smoking organizations take a similar approach with respect to the issue of raising cigarette taxes.

The Rest of the Story

Here is why I think the dogmatic axiom that every cigarette tax is a good thing is not appropriate from a broader public health perspective:

Because it depends on the nature of the specific tax proposal.

After nearly 21 years of experience in tobacco control, I have now come to believe that it is simply not appropriate for public health organizations or practitioners to issue unqualified proclamations of support for increased cigarette taxes and to follow them up by supporting and promoting any and all cigarette tax increases.

I have finally come to realize that such an approach basically means that the legislative intent behind a proposed tax policy is irrelevant. If all cigarette tax increases are "win-win-win" scenarios, like the Campaign for Tobacco-Free Kids suggests, then the legislative intent behind a tax policy proposal (including the way in which the resulting revenues will be allocated) is irrelevant to the evaluation of the validity of that proposal from a public policy standpoint.

And that is extremely problematic to me. Should we in public health be willing to evaluate a public policy proposal in such narrow terms and without having the full information about the policy, including the reason for it?

I don't think so. While from the narrow perspective of an anti-smoking organization, it might seem enticing to go on record as supporting cigarette tax increases in any way, shape, or form, I don't believe that it is appropriate from a broader public health or public policy perspective.

Here is an example to demonstate this critical point: Suppose that the Massachusetts legislature decided to propose a 25 cents per pack tax increase in order to build a new set of public parks in Weston (the wealthiest town in the state). That certainly seems like a discriminatory and unfair policy (why should the state's smokers pay for a public park in Weston, which already has more beautiful parks than any other city, whose residents least need another park, and which has enough money to build its own anyway?).

But suppose that the legislature intended to build a series of parks in the poorest sections of Roxbury in inner-city Boston and decided that newly created cigarette tax revenue was the appropriate way to fund such a product. That might be considered to be a fair policy.

At very least, one would have to acknowledge two things: (1) that the legislative intent behind a policy proposal is an important part of a legitimate evaluation of that proposal; and (2) that the intended use of the resulting tax revenue is an imporant part of a legitimate evaluation of the policy proposal.

A third factor that has to enter the picture is what the alternative policies to the one being proposed might be. For example, just because the legislature proposes a 25 cent per pack tax on cigarettes to fund a series of new parks in Weston does not mean that that is the only potential source of funding for these parks, or that these parks are the most appropriate use for the revenue if the tax increase is enacted. The cigarette tax has to be weighed against other potential new revenue sources before one can judge the appropriateness of increasing the cigarette tax as a solution to the problem of the need for more parks in Weston. And the need for new parks in Weston has to be weighed against other potential state needs.

The point is that public policy analysis is a rich process and a number of factors must enter into it, including the legislative intent behind the policy and the alternatives to each of the various aspects of the policy. One cannot and should not evaluate such a complex policy as cigarette taxation in such general terms as organizations like the Campaign for Tobacco-Free Kids are doing.

I can't sit here today and proclaim that a cigarette tax increase is a win-win-win policy. If it is a cigarette tax to build more parks in Weston, then it is a lose-lose-lose policy because smokers lose (they are unfairly bearing the burden of paying for parks for the state's wealthiest citizens), the poor in Boston lose (because they are unfairly being neglected in deference to the wealthy and politically powerful residents of a more affluent town), and the potential beneficiaries of a number of other important uses of the revenues lose out as well (perhaps there are needs even more pressing than building more parks in Boston -- like cleaning up the existing ones).

When I look at a policy like the one just enacted in Minnesota, in which the problem of the state's budget woes was solved by balancing the budget on the backs of smokers, in the face of the decimation of the state's tobacco control program and the absence of any significant state-funded services available to benefit smokers (including programs to encourage kids not to smoke and to help adults to quit), and in the presence of other viable options for raising the needed revenue such as taxing the wealthiest of the state's citizens or corporations, I view it as an inappropriate public health policy. I'm afraid that I just don't see it as a resounding victory as the Campaign for Tobacco-Free Kids proclaimed.

Interestingly, in response to my post criticizing the Minnesota legislature for balancing its budget on the backs of smokers, most of the arguments mentioned to me were general ones that defended cigarette taxes (in general terms) as not being regressive. But these arguments fail to address the specific concerns I have about this specific policy. Are anti-smoking groups actually saying that they believe it is the nation's smokers who should be the source of all the revenue that is needed to balance state budgets in these difficult fiscal times?

Apparently, yes.

Because to the best of my knowledge, not a single anti-smoking group has ever come out against any proposed cigarette tax increase, including the one in Minnesota which I view as being not only unfair, but destructive of the chances for restoration of any meaningful state tobacco control program in Minnesota.

The rest of the story suggests that the view at least some anti-smoking organizations have on cigarette taxes is too narrow and shallow from a broader public health perspective, and that it ignores a number of concerns that are critical to a valid evaluation of specific tax proposal measures as public policy.

It is this broader concern for a more appropriate evaluation of specific cigarette tax proposals as a form of public policy that leads me to challenge the dogma that I have been trained to believe. I've not only met a cigarette tax that I don't like; it's one that I think is blatantly unfair, discriminatory, and regressive, destructive to tobacco control and public health purposes, and inappropriate and unjustified from a broader perspective of public health policy.


Francis Thompson said...

The "intended use of the resulting tax revenue" from a cigarette tax increase may be relevant to an evaluation of the increase's merit. But the evidence we have suggests that even if all the revenue from a cigarette tax increase were simply given to Bill Gates as a personal gift, poor households would, on average, still be better off than in the absence of that cigarette tax increase. That's because collectively (due to a high number of quits), they would not increase their spending on cigarettes, but would substantially improve their health. It is hard to imagine ways states could spend supplementary cigarette tax revenue that would be so negative as to overwhelm the positive health impact for the poor. Perhaps bombing inner cities would qualify.

At any rate, I'd be awfully sceptical of legislators who claim they are using taxes from revenue source A to spend on worthy purpose X. Governments have multiple sources of revenue and many, many things to spend money on, and you have to look at the overall pattern of both to make any meaningful analysis -- otherwise it's just a giant shell game.

Compared to other Western countries, the United States is characterized by low cigarette taxes, low levels of social spending, and high levels of poverty and social inequality. We can agree that these are all relevant observations to people interested in public health. But are tobacco control organizations supposed to refuse to back tax measures because these measures do not simultaneously address all these issues?

Michael Siegel said...

No - tobacco control organizations should refuse to back tax measures if they are unfair, discriminatory, and inappropriate as an overall public health policy.

Bill Godshall said...

Francis is correct.

Cigarette tax increases always reduce cigarette consumption (a public health policy win for smokers and secondhand smokers), always generate additional and reliable amounts of revenue for government (a fiscal policy win), and are only paid by consumers who choose to do so (a win for consumerism).

Mike's assertions that cigarette tax hikes can be unfair, discriminatory, inappropriate and unsound public health policy cannot be objectively concluded.

John Ferguson said...

Godshall says: "Cigarette tax increases always reduce cigarette consumption...." What economic researchers have stated is that other things being equal AND ASSUMING any price increase normally should be elastic [ie 1% delta in price produces 1% delta in consumption] cigarettes exhibit an abnormality [perhaps linked to addictiveness] in showing less change [usually on the order of 0.6, so a doubling in the price,OTBE, would be of less consequence than for goods with perfect elasticity (1.0)] Almost all the research has been cross-sectional & used state level-data rather than microeconomic & longitudinal [tracking individual behavior for at least 2 points in time]
I won't attempt to summarize the economic literature marginals that question the dogma. I will mention one recent working paper which considers real world smoker behavior based on rational models:

Susan H. Busch, Mireia Jofre-Bonet, Tracy A. Falba, Jody L. Sindelar
Tobacco Spending and its Crowd-Out of Other Goods
NBER Working Paper No. 10974, December 2004
---- Abstract -----
Smoking is an expensive habit. Smoking households spend, on average, more than $1000 annually on cigarettes. For households in which some members smoke, smoking expenditures crowd-out other purchases, which may affect
other household members, as well as the smoker. We empirically analyze how expenditures on tobacco crowd out consumption of other goods, estimating the patterns of substitution between tobacco products and other expenditures. We
use the Consumer Expenditure Survey (1995 to 2001), which we complement with regional price data, and state cigarette prices. We estimate a consumer demand system of expenditures on cigarettes, food, alcohol, housing, apparel, transportation, medical care and controls for socio-economic variables and other sources of observable heterogeneity. Descriptive data indicate that, compared to non-smokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.
Life is strange...

Mrs. Non-Gorilla said...

michael -- at its core, your argument seems to be, "although raising cigarette taxes leads to a drop in consumption, they should be opposed if we cannot guarantee the revenue raised will be used in a manner with which we agree."

sounds a lot like cutting off your nose to spite your face. moreover, your arguments for the "inappropriateness" of tax increases as a public health measure don't seem to be based in any empirical reality.

Michael Siegel said...

Actually, my argument is not that cigarette taxes should be opposed if we cannot guarantee the revenue raised will be used in a manner with which we agree. My argument is that cigarette taxes are not appropriate from a public health perspective if their purpose is to balance the budget. A purely fiscal purpose does not justify a public health measure that is so clearly discriminatory and unfair.

If the purpose were to decrease cigarette consumption, then fine -raise the tax to $10.00 a pack! But that's not the purpose. The purpose is to use smokers to pay for programs that the government should be funding anyway, and thus, to save political face by avoiding having to tax wealthy citizens or corporations, or all citizens equally.

It's purely political and purely fiscal - thus, I don't view it as an appropriate public health measure.

Michael Siegel said...

I want to add one note in response to Bill's comment that cigarette taxes "are only paid by consumers who choose to do so."

If this is true, then it destroys the entire basis upon which tobacco litigation is based, and it essentially means that we should drop all tobacco litigation. After all, if smokers can simply make a choice whether to smoke or not, then there is no reason to hold the tobacco companies responsible for their actions and their decisions.

The argument Bill makes is probably the key tobacco company argument that I have observed in defense to its lawsuits. Perhaps it has some merit, but I tend to think that the strongly addictive nature of cigarette smoking is a more compelling perspective.

Bill Godshall said...

While cigarettes (like heroin, cocaine and alcohol) are addictive, many smokers (like many heroin, cocaine and alcohol addicts) overcome their addiction,
but the annual quit rate among cigarette addicts is only around 2%-3%.

Those addicts who quit are those who choose to do so (and who remain resolved to overcoming persistent and imposing withdrawal symptoms). I've been there and done that, but only after a half dozen unsuccessful cigarette quit attempts.

Price hikes (especially large price hikes) on all of these products (via tax hikes, litigation or whatever) increase the quit rate among addicts and also reduce consumption among the remaining addicts.

But I strongly disagree with Mike's claim that acknowledging or exposing these facts "destroys the entire basis upon which tobacco litigation is based."

There is no single basis upon which tobacco litigation is based
(i.e. many different civil claims have litigated against cigarette company defendants).

Also, just because some smokers quit their cigarette addiction shouldn't (and hasn't) protected cigarette companies from all liability claims.

Regarding John Ferguson's response, cigarette price elasticity is about -.4 (i.e. a 10% price hike results in a 4% consumption decline), with about half of the overall consumption decline due to smokers who quit, and the other half due to remaining smokers who reduce their cigarette consumption.

I don't consider Mike's arguments (which the cigarette lobbyists have been claiming for decades) against cigarette tax hikes and against smokefree employment contracts as health promotion, but rather as feel good social welfare state policy advocacy whose only beneficiaries are cigarette companies.