Do Cigarette Taxes Cause Obesity?

August 3, 2005

Between 1970 and 2002, the percentage of Americans who smoke fell from 37 percent to 22.5 percent. Over the same period, the number of obese Americans rose from about 14 percent to 30 percent. Coincidence?

According to a growing number of economists and health care experts, probably not. Daniel Gross explains why in a recent New York Times column:

Nicotine is a stimulant, which means that smokers burn calories faster. And it’s an appetite suppressant, which means that smokers eat less. Consider “French Women Don’t Get Fat,” the best selling book. Some critics said that the real reason chic Parisian women stayed trim while gorging themselves on croissants was that they smoked more than their American counterparts.

Indeed, conventional wisdom … has long held that short-term weight gain is the price to be paid for quitting smoking. But economists are increasingly applying their tools to measure the way monetary incentives, or disincentives, affect all sorts of human behavior – and hence the ability of government policy to alter it.

And they’ve been wondering whether high cigarette taxes, which are intended to encourage people to quit smoking, may have the unintended effect of redirecting them from one form of unhealthy behavior to another. (Full piece here.)

The old Pigovian logic of using simple excise taxes to “correct” externalities from things like smoking and over-eating—an idea subjected to a thorough refutation more than 40 years ago by economist Ronald Coase—has probably led to more bad policy than any other single idea in economics.

Once we accept the logic that the tax code can legitimately be used to tax and subsidize any behavior in society that emits externalities—however small or speculative in nature—we’ve given license to tax and subsidize essentially every action in the social world.

Once we’ve done that, we risk transforming the whole field of tax policy into a simple political power game about whose preferences ought to be imposed on whom, rather than a principled discussion about how to raise revenue for programs in the least economically harmful way.


Related Articles