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Here’s a tip for improving health with a politically popular tax

It seems increasingly unlikely that the PM’s grand plans for hospital reform will lead to meaningful changes anytime soon.

In the meantime, there is plenty the Government could be doing to improve the community’s health, argues Dr Harry Hemley, president of the Australian Medical  Association Victoria. And one involves a rare beast – a tax increase that would be widely welcomed.

He writes:

“The current media and political focus on hospitals is distracting attention from relatively simple measures the government could take that would result in significant health gains – and minimum political pain.

The conventional wisdom is that any Treasurer who raises taxes  on beer and smokes is dead meat politically. While this wisdom may still hold  for alcohol, increased taxes on cigarettes is now a political winner —  possibly the only popular tax.

For those who have watched family members and friends suffer with tobacco-related disease, a large tobacco tax  increase could not come around soon enough. But support goes well beyond those who have been personally affected by the harms of tobacco.

When voters of the previous century punished governments for increasing the taxes  on cigarettes, the majority of voters actually smoked — in the 1950s, around  70 per cent of men smoked. As late as 1988, one in three adults were regular  smokers. An increase in tobacco tax hit the hip pocket nerve directly.

(The smoking habits of journalists at the time may have also had a bit to do with the hysterical reporting of taxes on smokes. Luckily, journalists are now a much healthier bunch.)

Fast forward to  2010, and only about one in six voters smoke daily. Only a small proportion of  voters are hit in the hip pocket nerve by an increase in tobacco taxes.

And crucially, every smoker now knows that tobacco is bad for them. Most recognise that their smoking harms others and costs the community.  Smokers know that 15,000 Australians die each year from tobacco-related  illnesses, and that the cost to the economy is over $30 billion a year.

Also, smokers want to quit. Increasing the price of tobacco will prompt people to stop smoking. According to a recent Cancer Council Victoria  survey, a price increase of 50 per cent would prompt almost three quarters of  smokers to attempt quitting, and prompt six out of ten smokers to cut their  intake. Increasing taxes provides the incentives to do the right thing for their health.

Young people today know that smoking causes death and disease, and is considered a filthy drug by much of the community, yet  some still take up the habit. A large tobacco tax increase would price many young people out of the tobacco market and save the health system a packet in  the long term.

The Cancer Council survey showed that more than 60 per cent of current smokers were in favour of a tax increase on cigarettes.  That’s a big proportion of people saying “please tax me more” — not in the abstract way that some people say we need more government services, but a  direct response to a tax on current consumption.

So only one in six smoke, and 60 per cent of smokers would actually welcome a tax increase.  That just leaves a rump of less than seven per cent of the population who would get upset at an increase in tobacco taxes.

So in tough economic times and a mounting deficit, there’s a tax increase that would be welcomed by 93 per cent of Australians. There would also be health benefits and productivity savings as people quit smoking and children didn’t take up  the habit.

What are you waiting for, Mr Swan?”

• This is an edited version of an article that first appeared on AMA Victoria’s website

Comments 13

  1. EnergyPedant says:

    Ok plan, although do you remember the Yes Prime Minister episode where the health minister presents his plan to eliminate smoking (mostly based on pricing it out of existence) and gets rolled by the sports lobby since almost all of the sponsors of sport in the 80s were tobacco companies??

    Anyway is it entirely ethical to revenue raise by taxing people for something they are addicted to? e.g. Gambling or smoking or buying luxury cars

    Not sure if it is 100% ethical, but its still a good idea.

  2. Margo Saunders says:

    While smoking prevalence, on average, may have decreased significantly, try telling that to members of the occupational and socio-economic groups where smoking is still a majority behaviour and where a smoko is still very much a smoko. The creeping demise of constant in-your-face, look-here-they-are reminders in the form of high-visibility pack displays should help, especially together with other interventions. But if the price goes up just when the packs go out-of-sight, we’ll have the usual problem of discerning the effects of overlapping interventions.

  3. Doctor Whom says:

    Perhaps. But. The problem with this is that it is a very regressive tax.

    The prevalence figures smooth too much across socio economic groups and give a distorted picture.

    To oversimplify just a bit: basically middle class and educated people don’t smoke any more. A few do but they are outliers.

    The smokers are in the lower socio economic areas and amongst disadvantaged people and are particularly high amongst prisoners, unskilled labourers, the homeless, those with chronic mental illness, aboriginal populations, some migrant groups, and certain occupations.

    A new tax will be popular with the Clive Hamilton types who are keen to punish any sign of pleasure for the great unwashed.

    Many of those smokers will grudgingly approve of the tax but some will just go on paying more for smokes and buying less food, clothes or medical care. That might not be what we want.

    And it does seem a tad unfair that we cajoled and rewarded the genteel classes for many years with free stop smoking courses at work and by not raising the ciggies tax and now that the tertiary educated are largely off the weed we are going to slug
    the uneducated with a fiscal belt over the head.

  4. @Doctor Whom

    “Clive Hamilton types who are keen to punish any sign of pleasure for the great unwashed”. This comment could also be a succinct review of his book ‘The Freedom Paradox’.

  5. Jennifer Doggett says:

    Dr Hemley is assuming that all non-smokers would automatically support an increase in tobacco tax and that this support is a valid basis for introducing such a tax hike. By this reasoning he should also advocate a tax increase on doctors, given that 99% of Australians are not medical professionals and would therefore presumably be in favour of this policy.

  6. Doctor Whom says:

    aah Ben H-R – I’ll bet you have a flat screen telly – a favourite sneer at item for the neo-calvinists

  7. Doctor Whom says:

    Jennifer – I think Harry was saying 60% of existing smokers would support a rise in price/tax.

    I’m not sure a tax hike is a bad thing – but there will be some unintended consequences for those most addicted and those on low incomes. Often the same people.

    I’m also not sure how elastic cigarette consumption is for many individuals. If raising the price beyond a certain point has no or little effect on consumption then it is merely a discriminatory punitive tax/price raise for those who cannot or will not give up smoking.

  8. Jennifer Doggett says:

    Dr Hemley claims that “….less than seven per cent of the population…would get upset at an increase in tobacco taxes.” and that it is “a tax increase that would be welcomed by 93 per cent of Australians”. I am assuming that he is basing this figure on the 60% of smokers who reportedly would welcome a tax increase (10% of the total population) plus the 83%of the population who don’t smoke.

  9. Margo says:

    In the lengthy efforts to achieve tobacco reforms, such as the bleedin’ obvious ones like protecting non-smokers in enclosed public places, the level of public support was overwhelmingly strong for many years — yet it took about 20 years after the first US legislation to enact Australia’s first smoke-free law. One of the lessons of tobacco policy has been that it’s not the breadth of support but the depth of the opposition that matters: that 7% can be pretty noisy, especially when they are backed up by the tobacco industry and its well-cultivated hangers-on, and slink into politicians’ offices talking the language of jobs, economics, etc. The level of support also depends a lot on how you ask the question, with support for a hefty tax increase being stronger when it’s hypothecated to health-related initiatives, including smoking prevention and cessation support.

  10. Ben Harris says:

    I’m the policy director at AMA Victoria. Thank you all for your comments.

    Jennifer, your numbers are right on the assumption that non-smokers would welcome a tax increase on cigarettes – particularly if the likely alternative is a tax on something they consume.

    Re price elasticity Dr Whom, the Cancer Council research shows that a big price jump would lead to a significant number of people (75 per cent) trying to quit. Hopefully a fair proportion would be successful, saving their health and money. There are also data suggesting that most smokers would cut down a bit.

    However, the available data show that new potential smokers, predominantly children, are more price sensitive. A big increase in price would likely result in fewer children starting to smoke, leading to significantly better future health.

    Despite the significant gains in smoking made in the last couple of decades, tobacco still kills, still costs. The Cancer Council Victoria data (available on their web site) show that a big price increase would be a trigger for people to attempt quitting, and stop people starting.

    Given the big budget holes we currently have, tax increases are likely. A big increase in tobacco taxes must be fairly attractive.

  11. Croakey says:

    Thanks Ben for engaging with the commentators. Cheers, Melissa

  12. Ben Harris says:

    For those who are delving into the Croakey archives on tobacco, there is some really interesting polling on the tax increases outlined at http://blogs.crikey.com.au/pollytics/2010/05/13/smokes-votes-and-pm-approval/ which shows that the 60 per cent support from smokers for a tax increase evaporated to 26 per cent once it became a reality.

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