Decades after the harms of smoking have been well established and documented, tobacco use is still prevalent in today’s society, resulting in 7 million deaths per year worldwide (WHO, 2018). According to a study published in the BMJ, getting people to quit smoking may be as simple as making cigarettes more expensive. The study suggests that if we were to increase cigarette taxes by 100% in 13 middle-income countries across the globe, it could potentially save almost 450 million years of human life and avoid $157 billion in hidden medical costs (Ducharme, 2018).
To do this, the team used existing price elasticity data to estimate the impact of a 50% price increase in cigarettes. It was concluded that a 50% price increase would result in a 20% reduction of smoking. They attribute half of this reduction to quitting and half to fewer number of cigarettes smoked (Mishra et al., 2018). This is in stark contrast to what was found in high income countries such as the US, where according to a 2012 report by the National Bureau of Economic Research it was concluded that raising cigarette taxes by 100% would only reduce smoking by about 5% (Waters, 2014).
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Basic economic theory would suggest that younger or lower income individuals would be more sensitive to a price increase than others and that price elasticity in younger and lower income smokers would be twice as high than for older and higher income smokers. For this reason, the younger and lower income smokers would see greater health benefits from this scenario. Health benefits aside, there is much debate on whether taxation on cigarettes help or hurt the poor economically.
Those for the tax claim that smokers will be pressured into quitting and the money received from taxes goes back into the system which helps them stay out of extreme poverty. Those against the tax claim that the price hike won’t deter them from smoking, it’ll only cause them to sacrifice the more important things such as money spent on their homes and families (Waters, 2014).
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