Tobacco Tax Equity Act Perpetuates Economic and Health Disparities

Mainstream interest in the issue of structural racism is long overdue. Yet nascent efforts to root out vestiges of racism in the U.S. political system will fail to achieve any real resolution to systemic inequalities if old forms of discrimination are simply replaced with new ones. That is what congressional Democrats will be doing if they enact the Tobacco Tax Equity Act (H.R.2786), which would double the federal cigarette tax and raise taxes on all forms of recreational nicotine, regardless of its relative risks and potential benefits, to an equivalent high level. 

Though cloaked in rhetoric about health and justice, the tax hike will accomplish neither goal. It will squeeze more money out of low-income consumers, among whom smoking rates are highest. Raising the cost of lower-risk sources of nicotine to, or even higher than, the price of cigarettes will also make switching to potentially life-saving alternatives unaffordable to those most likely to benefit.

Taxes on tobacco are among the most regressive, pulling a greater portion of income from low-income consumers. Furthermore, because smoking is higher among lower income populations, the tax is doubly regressive, drawing the bulk of its revenue from those who can least afford to pay.

That alone isn’t necessarily a good argument against such a tax, if a case could be made that the benefits outweigh this harm. That’s what proponents have tried to do by focusing on the evidence that raising the cost of tobacco lowers the overall smoking rate. For example, Jason Furman, a Harvard professor and former Chairman of President Obama’s Council of Economic Advisers, recently argued in a Twitter thread that, even if tax is regressive, it’s also progressive because “the indirect effects are much larger, more important … conferring larger health gains for lower-income households.” But such logic assumes that all low-income smokers will respond to the tax by quitting and spares little thought for how it might affect those who don’t.

Raising the cost of cigarettes might produce small decreases in the overall smoking rate and researchers have found that low-income smokers are at least as sensitive to changes in cigarette prices as their higher-income counterparts. But research and experience also demonstrate that quitting isn’t the only response available to price increases. While the tax may prompt some to quit, many will simply seek out more affordable ways to get their fix. Some will continue to buy cigarettes legally and cut costs elsewhere. But, many others—particularly when the price increase is large—will turn to illicit and lower-cost sources, like smuggling or buying “loosies” from the ubiquitous cigarette street dealer.

For those most committed smokers who neither quit nor reduce smoking in response to the tax, there will be no benefit. To the contrary, it will leave them poorer, perpetuating income disparities and reinforce feelings of disenfranchisement among marginalized consumers who have to rely on street dealers while their wealthier neighbors simply pay the tax or turn to any number of other simple life pleasures.

Even if it worked as planned, the Tobacco Tax Equity Act is bad policy from a public health standpoint. Smoking is deadly, no question. But what makes smoking so deadly is not nicotine but combustion—inhaling the products of burning tobacco and paper. If smokers could get the nicotine they desire without combustion, many lives could be saved. The more smokers who switch to lower risk product—whether nicotine replacement therapy (the patch) or non-combustible recreational nicotine (e-cigarettes, snus, pouches, or heated tobacco)—the more will be spared of the lung cancer, heart disease, strokes, and other life-threatening conditions caused by smoking. That is why the Food and Drug Administration allows nicotine replacement therapies to be sold over the counter and many insurance plans cover their cost. But instead of encouraging recalcitrant smokers to switch to these life-saving alternatives, the tax plan seeks to punish them.

According to the Tax Foundation, the proposal would add $2 to the price of a pack of cigarettes, but $2.25 to the price of an e-cigarette pod (which is equivalent in nicotine to a pack of cigarettes) and $6.75 to a standard three-pod pack. This price jump might deter some adventurous teens from experimenting with nicotine vapes. But it will have the same effect on some segment of the adult population, particularly those who are older, lower-income, and more recalcitrant to give up their smoking habit—the very people most likely to benefit from switching to noncombustible nicotine. 

Backers of the tobacco tax seem unconcerned about these unintended consequences, which will fall on those with the least amount of political power. Among white Americans, smoking is comparatively low, with just about 14 percent of adults continuing to smoke. However, among ethnic minorities, people living below the poverty line, those without a college degree, LGBT individuals, and those with substance abuse or mental health challenges, the smoking rate is much higher. For example, an estimated 90 percent of those diagnosed with schizophrenia and up to 70 percent of those diagnosed with bipolar disorder smoke.

One likely cause of higher-than-average rates of smoking among these groups, according to researchers, is because nicotine has certain physiological, psychological, and emotional benefits, including enhancing mood, concentration, and motor functioning, while reducing stress, depression, and inflammation, among other benefits. Wise public policy would recognize that a significant portion of the public derives real benefits from nicotine and, rather than promoting total abstinence, encourage those who can’t or won’t quit to consume nicotine in ways that won’t lead to death and disease—similar to how drug policy has embraced harm reduction by supporting things like clean needle exchanges, safe injection sites, methadone, and naloxone.

But, preventing death and disease isn’t the purpose of the tobacco tax plan. The purpose is to generate revenue to pay for Congress’s $3.5 trillion spending package and, at the same time, appease white, middle-class, suburban parents who seem more concerned with their kids vaping e-cigarettes than the millions of adults who will die from smoking. The Tobacco Tax Equity Act will likely do more harm than good and particularly harm marginalized people the most, yet is still being pushed by those who claim to care about equity.