1. Are Tobacco Taxes Regressive? The Global Evidence
Frank J. Chaloupka, University of Illinois at Chicago
Tobacco Taxation: Win-Win for Public Health & Resource Mobilization
World Bank, Washington DC, 18 April 2017

2. Large and growing evidence base on the economics of tobacco and tobacco control
In the process of finalizing joint NCI/WHO monograph that summarizes/synthesizes this evidence and provides the base for our presentation

3. Regressivity of Tobacco Use

4. Figure Prevalence of Current Tobacco Use Among Adults Age 15 and Older, by Wealth Quintile, 2008–2010
Source: NCI & WHO 2016

5. Tobacco Use & Equity Health consequences of tobacco use
Generally “regressive” with greater share of burden of tobacco caused disease falling on lower income populations
Greater use of tobacco among lower SES groups in most countries
Less access to health care to treat diseases caused by tobacco use

6. Source: Jha et al, 2006 6

7. Poverty and Tobacco Use
Health and economic burdens of poverty are compounded by tobacco use
Responsible for impoverishment of over 50 million in China and over 15 million in India
Crowding out of other spending:
Bangladesh: tobacco money spent equivalent to:
Males = 1402 calories of rice per day
Females = 770 calories of rice per day
The burdens of poverty are compounded by chronic tobacco use. Its health burdens, and its concomitant loss of income and need for catastrophic health care spending, have a significant impact on poor households (de Beyer et al. 2001), while Liu et al. (2006) note that excess medical expenses due to smoking are responsible for the impoverishment of over 50 million people in China. Poor families are often caught in a vicious cycle of tobacco use and poverty, as spending on tobacco products crowds out spending on food, housing, clothing, education, health care, combined with the loss of household income from tobacco-related mortality and morbidity. According to Efroymson et al. (2001), the average male smoker could have afforded an extra 1402 calories of rice per day using the money spent on tobacco, while the average female smoker could have afforded 770 calories.
Sources: Hu, et al., 2008; John, et al., 2011; Efroymson, et al., 2001 7

8. Crowding Out 17 ITC Countries
Spending on tobacco crowds out spending on essentials.
– Greater crowding out in LMICs
Source: ITC Project, 2012

9. Tobacco & Poverty
Source: NCI & WHO 2016

10. Tobacco Use and Poverty
Chapter 16, Conclusion 2:
Tobacco use in poor households exacerbates poverty by increasing health care costs, reducing incomes, and decreasing productivity, as well as diverting limited family resources from basic needs.
@tobacconomics

11. Effectiveness of Tobacco Taxes
Chapter 4, Conclusion 1:
A substantial body of research, which has accumulated over many decades and from many countries, shows that significantly increasing the excise tax and price of tobacco products is the single most consistently effective tool for reducing tobacco use.
@tobacconomics

12. Tobacco Taxes and Equity

13. Impact of Tobacco Taxes on the Poor
July 23, 2010 – San Francisco Examiner
“Democrats are relying more heavily in their midterm 2010 election message that Republicans care nothing about the poor. Conveniently absent from this analysis is Republican opposition to President Barack Obama’s cigarette tax increase…… While higher cigarette taxes do discourage smoking, they are highly regressive. Analyzing a slightly less severe proposal in 2007, the Tax Foundation noted that ‘no other tax hurts the poor more than the cigarette tax.’” Peyton R. Miller, special to the Examiner.
@tobacconomics

14. Tobacco Taxes & Equity
Tobacco taxes are clearly regressive in high income countries
Given greater prevalence of smoking in lower income populations
Taxes are likely to be regressive in most low/middle income countries
Depends on distribution of tobacco use by income level and tax structure
Less regressive in countries where differences in prevalence by income level are smaller; even less where prevalence/consumption rises with income
Less regressive in countries with ad valorem taxes and/or tiered taxes where tax as share of price increases with price

15. Impact of Tobacco Tax Increases on the Poor
Tobacco taxes are regressive, but tax increases can be progressive
Greater price sensitivity of poor – relatively large reductions in tobacco use among lowest income populations, small reductions among higher income populations
Health benefits that result from tax increase are progressive
@tobacconomics

16. Who Pays& Who Benefits Impact of Federal Tax Increase, U.S., 2009
Compared with lower-income individuals (whose income is below FPL or % below FPL), higher-income individuals (whose income is greater than 200% FPL) have a larger share of the tax increase and smaller share of reduced deaths. This is because lower-income tobacco users are more price sensitive and they quit or reduce tobacco consumption more than the higher-income tobacco users.
Source: Chaloupka et al., in progress; assumes higher income smokers smoke more expensive brands

17. Who Pays & Who Benefits Turkey - 25% Tax Increase
Source: Adapted from Önder & Yürekli, 2014
@tobacconomics

18. People’s Republic of China Distribution of marginal taxes and health benefits by SES
Lowest SES group: Pays 6.4% of increased taxes but receives 32.1% of health benefits: hence, health/tax ratio: 5.02
Source: ADB 2013

19. Tobacco Taxes & Equity Need to consider overall fiscal system
Key issue with tobacco taxes is what’s done with the revenues generated by the tax
Greater public support for tobacco tax increases when revenues are used for tobacco control and/or other health programs
Net financial impact on low-income households can be positive when taxes are used to support programs targeting the poor
Concerns about regressivity offset by use of revenues for programs directed to poor

20. Philippines ‘Sin Tax’ Reform
Source: Paul, 2016

21. Philippines ‘Sin Tax’ Reform
Source: Paul, 2016

22. Summary

23. Summary
Tobacco use imposes disproportionate burden on the poor and contributes to poverty
But tobacco taxes are regressive
Tobacco tax increases are progressive
From both a health and financial perspective
Earmarking new tobacco tax revenues for pro- poor programs reduces concerns about impact of tax increases on the poor
@tobacconomics 23

24. Sign up for newsletter: bit.ly/tbxemail
For more information:
@tobacconomics
Sign up for newsletter:  bit.ly/tbx