Death and taxes: using the latter to reduce the former.

To cite: Warner KE. Tob Control Published Online First: [please include Day Month Year] doi:10.1136/ tobaccocontrol-2013051079 As the old adage attributed to Benjamin Franklin puts it, there are only two things in life that are certain: death and taxes. In the case of cigarette smoking, they are closely related. Raising cigarette prices, primarily by increasing cigarette taxes, reduces smoking, and thereby reduces smokingproduced death and disability. Indeed, there is no more effective weapon in the arsenal of evidencebased tobacco control policies. Taxation has become a First Principle of tobacco control worldwide, hailed by the World Bank’s 1999 ‘bible’ of international tobacco control, Curbing the Epidemic: Governments and the Economics of Tobacco Control, and embodied in Article 6 of the Framework Convention on Tobacco Control. Virtually everyone engaged in tobacco control now understands the importance of keeping cigarette prices high and the role of raising taxes in doing so. It was not always so. In the late 1970s and early 1980s, many public health professionals believed that using taxation to reduce smoking was ineffective and even repugnant: for both ‘moral’ and practical reasons, discouraging smoking, they concluded, had to rely on important intrinsic considerations, not extrinsic factors like price. Smokers, they felt, should quit because of their concern for their own health or to ensure their children that they would still be around as the children grew to adulthood. Furthermore, they were convinced that taxation would have little impact because smokers were addicted, and therefore, would not change their behaviour in response to higher prices. The origins of the end of aversion to taxation as a tool of effective tobacco control lie in the publication of two research articles by Eugene Lewit and his colleagues using sophisticated econometric methods. The first, published in 1981, demonstrated that American teenagers’ smoking was very price sensitive: for every 10% increase in price, the authors estimated that smoking ‘participation’ (prevalence) by 12–17-year-olds would decrease by 12%, while the teens’ total demand for cigarettes would decrease by 14%. The second study, published a year later, concluded that for adults, a 10% price increase would induce a decrease in the demand for cigarettes by 4.2%, an estimate that has stood the test of time for developed nations. 7 Three years later, I translated these findings into their stark implications for public policy in the US. Congressional legislation had dictated that a temporary doubling of the federal cigarette excise tax to 16 cents per pack—a short-term revenue measure—would end in 1985, with the tax reverting to its previous level of 8 cents per pack. Using the findings of Lewit et al, but employing methods and language more accessible to the general public, I demonstrated that if permitted to occur, the halving of the tax would induce two million additional Americans to smoke, including more than 460 000 teens, with more than 480 000 additional premature smokingproduced deaths occurring in the future. 9 Through a well-orchestrated advocacy effort by Washington-based public health groups, this analysis contributed to the US Senate’s decision to make the tax increase permanent. This direct application of findings from research on cigarette price and consumption—and a subsequent successful advocacy campaign to raise the cigarette tax in Canada, which also relied on such analysis—altered public health attitudes towards using tax to influence smoking. It also inaugurated an era of more intensive research on tax, price and smoking, with well over 100 studies documenting the effects of taxation, through its impact on price, on smoking. Early on, studies derived almost exclusively from developed countries’ experiences, focusing on price elasticity of cigarette demand in general, with interest in how elasticity varied by age, gender and occasionally socioeconomic status. Over time, however, the research began to address more nuanced questions: when prices are raised on one tobacco product (eg, cigarettes), is the demand for other tobacco products affected (eg, smokeless tobacco)? Yes, it increases. How does addiction affect price responsiveness? This question spawned a ‘boomlet’ in ‘rational addiction’ studies. These sometimes controversial studies suggested that the long-run price elasticity may be as much as twice the conventionally estimated short-run elasticities. What compensatory behaviours might smokers take in response to price increases? According to one study, they might switch to higher nicotine cigarettes so that they could get their daily dose of nicotine from fewer cigarettes. And so on. Surely, one of the most important developments in this literature has been the relatively recent emergence of a body of research on the effects of tax and price on smoking in low-income and middle-income countries (LMICs). Often reflecting severe data limitations on both cigarette price and consumption, as well as the lack of a welldeveloped indigenous research infrastructure, some of the earliest studies were quite primitive in nature or heroic in approach. Notably, for example, in 1990 a complete lack of data on cigarette and tobacco price forced Chapman and Richardson to estimate excise tax elasticities of demand for cigarettes and tobacco in Papua New Guinea. Observing that price elasticities had to be larger than excise tax elasticities, they inferred from their