Working Paper: NBER ID: w3082
Authors: Michael Grossman
Abstract: Health taxes on alcohol and cigarettes imposed by the Federal government of the United States have been very stable since 1951. This paper summarizes research that shows that increased taxation, which results in higher prices, would discourage alcohol abuse and cigarette smoking. One striking finding is that a policy to raise the Federal excise tax on beer in line with the rate of inflation over the last three decades would cut motor vehicle fatalities of 18 to 20 year olds, many of which are alcohol-related, by about 15 percent, saving more than 1,000 lives per year. A second is that over 800,000 premature deaths in the cohort of Americans 12 years and older in 1984 would be averted if the Federal excise tax on cigarettes were restored to its real value in 1951.
Keywords: health economics; taxation; alcohol; cigarettes; public policy
JEL Codes: I18; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased taxation on alcohol (H29) | Higher prices (D49) |
| Higher prices (D49) | Discouraged consumption (E21) |
| Higher federal excise taxes on beer (H29) | Reduced motor vehicle fatalities among 18 to 20-year-olds (R48) |
| Higher prices from increased federal excise taxes on beer (H29) | Reduced alcohol consumption (L66) |
| Increased cigarette taxes (H29) | Lower smoking rates (I12) |
| Lower smoking rates (I12) | Reduced mortality (I14) |
| Restoring federal excise tax on cigarettes to its real value in 1951 (H29) | Averted premature deaths among Americans aged 12 years and older in 1984 (I12) |