This article goes into detail about what smokers and drinkers impose on everyone else through health and economic factors. The first point addressed was the comparison between the balance of payment of smokers and drinkers versus non-smokers and non-drinkers. With current taxes on alcohol there isn’t a balance and drinkers are only paying for half of what costs are imposed on non- drinkers. Whereas with smokers, there’s more of a balance and the taxation on cigarettes covers at most the costs non-smokers are paying, or subsidizing. The costs are then discussed in full based on a formula created to quantify these externalities’ versus the internalities within each group. Things such as probability are taken in to consideration, when it comes to drinking and driving, or fires, and how likely these are to occur. How likely someone is going to live past a certain age is also formulated in. These are compared to a non-smoking and non-drinking group, to see the costs created. For example, smokers have a shorter life expectancy which means they pay less of the taxes and premiums. With each externality calculated, the information was also presented with various discount rates due to the fact that a dollar today isn’t worth the same in the future.
The shorter the amounts between consumption and death the less the effect of a discount rate, which is why smoking is affected more by the discount rates. There also was underreporting taken into consideration and calculated accordingly, because a lot of people will report less than what they actually consume. Another externality that I was surprised to see calculated was the cost of lost lives. The way this was measured was through the willingness to change the probability of you surviving. After the table presented the calculations it was summarized that total externalities created by smokers is estimated at $.15. Externalities’ included in this statistic are: Medicare, sick leave, group life insurance, retirement pension, fires, and the taxes on income to finance medical services. For heavy drinkers, the external costs were concluded to equal $1.19 per excess ounce of alcohol or $.48 per ounce.
The externalities included: fires, criminal justice, social programs, and lost lives. In contrast to smoking, drinking increases all costs due to early retirement and triggers pensions and disability. In conclusion the article stated that the current average tax on cigarettes are higher than the externalities and the average tax on alcohol is lower than the external costs. In sum, this means that smokers probably pay enough to cover their costs and heavy drinkers do not. After these statistics were presented the article presented different arguments for why taxes should be increased for both alcohol and cigarettes. Why might you tax more? To discourage uniformed adolescents to pick up on the addiction, some don’t appreciate the risks, or higher taxes would make sense from a revenue standpoint. Why shouldn’t taxes be raised? It would affect lower incomes more than higher incomes, would affect people that are light users.
