Raising taxes to reduce smoking prevalence in the US: A simulation of the anticipated health and economic impacts

Objective: To estimate health and economic outcomes of raising the excise taxes on cigarettes. Methods: We use a dynamic computer simulation model to estimate health and economic impacts of raising taxes on cigarettes (up to 100% price increase) for the entire population of the USA over 20 years. We also perform sensitivity analysis on price elasticity. Results: A 40% tax-induced cigarette price increase would reduce smoking prevalence from 21% in 2004 to 15.2% in 2025 with large gains in cumulative life years (7 million) and quality adjusted life years (13 million) over 20 years. Total tax revenue will increase by $365 billion in that span, and total smoking-related medical costs would drop by $317 billion, resulting in total savings of $682 billion. These benefits increase greatly with larger tax increases, and tax revenues continue to rise even as smoking prevalence falls. Conclusions: Increasing taxes on cigarettes is a unique policy intervention that reduces smoking prevalence, generates additional tax revenue, and results in significant savings in medical care costs. (c) 2007 The Royal Institute of Public Health. Published by Elsevier Ltd. AR rights reserved.