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NAQC Newsroom: Research

Cigarette Taxes and the Federal Budget — Report from the CBO.

Tuesday, December 11, 2012  
Posted by: Natalia Gromov
Baumgardner JR; Bilheimer LT; Booth MB; Carrington WJ; Duchovny NJ; Werble EC. N Engl J Med. Nov. 29, 2012; 367:2068-2070.

The CBO modeled a hypothetical policy for reducing smoking: an increase of 50 cents per pack in the federal excise tax on cigarettes. (The increase would be indexed over time to keep pace with inflation and with growth in average income. Such a policy lies within the range of previous legislative changes to the federal excise tax, currently at $1.01 per pack.) The CBO's modeling approach entailed following predicted cohorts of smokers and people who would have been smokers in the absence of the policy and comparing their expected mortality rates, expected annual per capita spending for their health care, and their projected earnings under current law and under the policy. The results showed that a tobacco tax indexed to inflation could contribute both to better health and lower federal expenses; over 10 years a 50 cent tax indexed to inflation would cut the federal deficit by $41 billion.

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