Tuesday 27 April 2010

Talking about excise

Again, Matt and I found last year that collected alcohol excise tax revenues exceed tallied external costs of alcohol misuse, which include the public health costs. It's consequently pretty depressing when we keep reading folks claiming that alcohol tax increases are a good idea because of the costs of drunks to the emergency room system. Those costs can be good reason for doing something like punishing actual behaviours that lead to costs while drunk, like drunk and disorderly or fights or drink driving. But they're not reason for hiking the tax: the tax already covers those costs.

While this is true for alcohol, it's even more true for tobacco. Even the study commissioned by the anti-tobacco lobby agreed; I included this quote from their report in my review of the study in the New Zealand Medical Journal a couple years ago:
it does seem reasonably apparent that the tax contribution of approximately $1 billion annually by smokers exceeds substantially the external costs of smoking which fall on non-smokers. If savings on pension costs from premature mortality were added as well the net fiscal contribution of smokers, to the fiscal gain of non-smokers, would be further increased.
Moderate drinkers are over-taxed relative to the costs they impose; drinkers on average pay about the right amount of tax if we want collected taxes to match external costs. For tobacco, smokers are grossly overtaxed relative to the costs they impose on the public health system; this is true in every country where I've seen the numbers tallied. Any sensible review of excise taxes as a whole would reduce the excise tax on tobacco.


  1. I read your link - the summary document says $1.7b of costs vs $1b of tax revenue (not sure if this inlcudes GST which should be excluded from the tax revenue). Where does your figure come from?
    I personally don't care if people smoke or not - my only requirement is that the exise tax roughtly equals the increased costs so I am not subsidising.

  2. There's a difference between the costs to the public health system of smokers' smoking and the costs tallied in the report. The report includes things like the total value of everything that a smoker might have produced had he been employed at the average wage for an extra twenty years rather than dying early. Of course, the smoker forgoes those wages himself: those are costs internal to the smoker, not costs imposed by the smoker on the rest of us.

  3. Read my review of their report for reasons why those extra costs really don't count as costs to society, or check my review of the BERL report for similar critique of the "social costs" of alcohol.