About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

127 IRET Congressional Advisory 1 (2002)

handle is hein.taxfoundation/iretcgadv0124 and id is 1 raw text is: Congressio°na Avsor April 16, 2002 No. 127 CONFUSING, MISLEADING CDC FIGURES ON ECONOMIC COSTS OF SMOKING On April 12, the Centers for Disease Control and Prevention released a widely-quoted report entitled Annual Smoking-Attributable Mortality, Years of Potential Life Lost, and Economic Costs - United States, 1995-1999. The report contained new estimates of the cost of smoking in terms of higher medical bills and what it calls lost productivity. The productivity figures are really lost production, i.e., output and income of smokers due to early death.' There are several problems with the study and the interpretation usually accorded such figures by the media. The CDC report should not be regarded as a good piece of economic analysis nor as a guide to social policy. If people die, then the output they would have produced and the income they would have received for producing it are lost. It is important to bear in mind, however, that this loss of output and income is borne by the smoker and his family, not by society or the economy. The CDC report does not make this clear. A worker or saver is paid for what he adds to output. His pay or investment income entitles him to buy as much of other people's output as he himself has produced. If he does not produce, he loses a corresponding claim to other people's production, and the loss is his and his family's, and no one else's. He pays taxes, of course, in effect turning some of his output over to pay the people who provide government services, and if he dies, the tax revenue dies with him. But, at least on average, the taxpaying public is supposed to receive services equal to the value of the taxes they pay. Unless the government sector is systematically exploiting the rest of the population, this is a wash. Smoking entails health costs. Smokers clearly spend more on medical care at the times when smoking makes them ill than they would if it did not affect their health. Insofar as they pay for this care with their own money, it comes at the expense of the family's consumption of other products, and takes nothing from other people. Of course, the medical outlays may be covered by insurance. In well-run insurance plans provided by private carriers, smokers are often charged higher premiums than non-smokers, and the smokers bear the cost of smoking. Smokers die earlier than non-smokers. Consequently, they draw smaller Social Security retirement benefits than non-smokers. Smokers do incur Medicare costs earlier than non-smokers, but smoking substitutes for other causes of death that also involve high Medicare costs. On balance, most studies find that smokers cost the government less in terms of health care outlays than the sum of what they save the government in unclaimed retirement benefits and pay the government in tobacco taxes at existing tax rates.2 The CDC study noted that such effects of smoking as disability, absenteeism, excess work breaks etc, which are more related to what we usually think of as productivity, were not measured. Indeed, it would be hard to estimate them. (And to be fully objective, if one were to try to measure the effect of smoking on productivity, one should note that many smokers consider nicotine to be a stimulent and would say that Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N.W., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 9 Fax 202-463-6199 0 Internet www.iret.org

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most