Out of the rubble of the recent negative coverage and legal action against the tobacco industry comes a little publicized government report that industry spinmeisters hope to employ on behalf of their legal and public defense. A National Bureau of Economic Research study by Duke economics professor W. Kip Viscusi indicates that society may actually incur a net dollar profit from cigarettes. According to the study, the medical costs attributable to smoking averages 55 cents per pack, but smokers defray that social cost by paying the 53 cent per pack cigarette tax already in place. Smokers' extra sick-leave costs are less than 1 cent per pack, and health-insurance premiums rise 14 cents for every pack smoked. Fires caused by smoking total less than 2 cents per pack while smokers that die early deprive society of about 40 cents per pack in tax revenue. On the balancing side, because smokers are likely to die at an earlier age, they spend less time in nursing homes, saving society 23 cents per pack. Smokers also collect less in Social Security and pensions, a societal gain of a sizable $1.19 per pack. The net result is that every pack consumed saves society 83 cents for a total of $20 billion in savings a year. Viscusi's finding of a net revenue bonus in the health effects of smoking is supported by a 1991 Rand Corporation study and a 1995 Congressional Research Service report.
The finding may prove important as the tobacco industry juggernauts dig in against mounting lawsuits by states seeking to collect compensation for smoking related cost burdens on state health care rolls. Counting the recent Texas suit, a gang of seven democratic state Attorney Generals have initiated litigation. However, with a buildup of economic studies like Viscusi's countering state claims that government is subsidizing the side effects of the tobacco companies' products, the likelihood of winning the suits against a united and secretive tobacco industry is quickly diminishing. Furthermore, shrewd tobacco lawyers will argue that cigarette companies are no more responsible for offsetting state health care rolls than similar health-risk products like alcohol or automobiles.
One consideration the tobacco spin on the Viscusi report fails to consider is that smoking is a habit with severe externality costs beyond the addicted smoker. Secondhand smoke is a collective bad that for nonsmokers offers a considerable no exit quality. How many of us have gone to a public arena, restaurant or been with friends and have felt inhalation of smoke to be inescapable? A recent Environmental Protection Agency report on indoor air pollution claims that second hand smoke kills 50,000 nonsmokers each year and causes 150,000 to 300,000 respiratory illnesses in infants under 18 months old.
Based on intuition alone, nonsmokers feel threatened by smokers habits and a general ill-will has surfaced towards tobacco companies and their products. The tobacco industry's image has been further damaged by a group of former cigarette scientists that are now willing to testify that tobacco companies knowingly tampered with the levels of addictive nicotine.
Politicians are starting to realize that latent public animosity towards the tobacco industry stretches far beyond partisan dimensions, and that there is constituent demand for united government action in solving the collective problems caused by Tobacco Road. As noted, chief among current government policy actions is litigation, and beyond the seven state suits in progress, the cigarette industry is currently the subject of five federal grand jury investigations across the country. However, litigation suits only make reparations for harm already done, and beyond the minimal effects of negative publicity and symbolic message, fail to substantially curb existing tobacco consumption.
A possible policy solution rests with the adoption of state cigarette taxes that add an additional $2.00 to the current price of a pack of cigarettes. Such a large tax would have immediate effects on overall cigarette consumption since even extremely addictive drugs like heroin have been shown to possess price elasticity. Most importantly, the $2.00 tax would have its greatest effect on young, teenage smokers. Lacking large amounts of disposable income, teenage smokers would be less willing to incur the cost of continuing or beginning to smoke.
Politically, the tax would face formidable opposition from the tobacco lobby, but would have support from public interest organizations, doctors associations, and any health care providers serious about preventative medicine and cutting costs. Furthermore, the potential revenue generated by a proposed $2 cigarette tax would generate backing from many political interests exterior to the arena of the Tobacco War. These groups would view the revenue as a state lottery waiting to be won, and would support the tax while at the same time planning their strategy for gaining a share of the tax revenue. Support would branch out into the general electorate through popular anticipated gains in revenue for state infrastructure, education or budget balancing.
