Taxes As An Antidote To Addiction

OF ALL THE ASSAULTS THE TOBACCO companies are enduring these days, none distresses them more than the prospect of a new federal tax on cigarettes. President Clinton suggested the idea last fall as a way to help pay for health-care reform-and unlike the rest of his plan, the proposal has gained momentum ever since. Voters and members of Congress like the idea of financing health care with a tax that most people won't have to pay. But the plan could do more than generate money. Advocates say that by discouraging children from taking up cigarettes and motivating smokers to quit, a national cigarette tax could prevent millions of deaths.

Smoking kills 420,000 Americans a year. That's 50 times as many as illegal drugs. Yet the federal government taxes cigarettes at a lower rate today than it did in the early '60s, when the health effects of smoking were being discovered. Even when the current federal levy of 24 cents a pack is coupled with state taxes, the combined rates are the lowest in the developed world. The tobacco industry has spent millions denouncing the Clinton plan to raise the federal tax by 75 cents, to 99 cents a pack. Philip Morris Cos. and the R.J. Reynolds Tobacco Co. recently bused thousands of tobacco workers into Washington to protest the president's proposal. But as health activists garner congressional support for a whopping $2-a-pack increase, 75 cents is looking more like a floor than a ceiling.

A few state and national governments already are using taxes as an antidote to addiction, and achieving dramatic results. in Canada, levies totaling $3 a pack have helped cut tobacco consumption nearly in half since 1980 (from 70 billion cigarettes a year to just 40 billion). Among teenagers-the tobacco industry's main source of new recruits the smoking rate has dropped by 60 percent since taxes went up.

No one has achieved such results in this country, but a handful of states are trying. In 1988, California voters raised the state's cigarette tax by 25 cents a pack and set aside a fifth of the proceeds to fund community-based antismoking programs. Those efforts-which include slick ad campaigns portraying smoking as buffoonery and tobacco executives as drug pushers-have worked. Researchers at the University of California, San Diego, report that the initiative has helped reduce the state's smoking rate by 28 percent over five years (the national rate declined only 10 percent). Proposition 99, as the initiative is known, still commands broad popular support, and federal health officials have declared it the standard to which every state should aspire. But California's fiscally strapped state government is slowly killing the initiative, by redirecting the tax proceeds that voters set aside to sustain it.

That's one argument for more ambitious federal action. Experience shows that every 10 percent increase in the cost of cigarettes triggers a 4 percent drop in consumption. It follows that heftier taxes should bring bigger health benefits. According to the Coalition on Smoking OR Health (a group that-includes the American Heart Association, the American Lung Association and the American Cancer Society). a tax of $2 a pack would produce $25 billion in new revenues. And by reducing the number of U.S. smokers by 7.6 million, it would theoretically prevent nearly 2 million smoking-related deaths.

Many smokers resent the idea that they need to be taxed for their own good. And tobacco farmers say the tax could destroy them, by strangling the market for their product. Health advocates counter that since smokers' illnesses cost the economy $68 billion a year, taxing their habit is a fair way to recover some of the expense. And they maintain that by setting aside a small share of the revenues, the government could cover the farmers' losses and help them switch to nonlethal crops.

How does the public respond? A recent Cancer Society poll suggests that 66 percent of all voters, including a third of those who smoke, support a tax hike of 82 a pack. In Congress, meanwhile, two representatives-Mike Andrews of Texas and Pete Stark of California-have drafted so-called $2 bills. "The momentum has really changed," says Cliff Douglas, a spokesman for the Coalition on Smoking OR Health. "The president came in with an opening bid and the tobacco lobby has been trying to knock it down. Now all the pressure is going in the opposite direction." Not all the pressure. Congress will continue to hear from the thousands of workers whose livelihoods depend on cigarette sales. But saving jobs may be a hard sell when the alternative is saving lives.

TAX INCREASES    # of fewer smokers   Lives saved   New revenue/yr.


   $0.75             3.7 million        900,000      $11.0 billion

   $1.00             4.5 million      1.1 million    $14.0 billion

   $1.50             6.2 million      1.5 million    $19.2 billion

   $2.00             7.6 million      1.9 million    $25.0 billion