Smokers Pay Costs of Habit, but Drinkers Don’t, Study Finds

Contrary to earlier research findings and the rhetoric of recent tobacco tax campaigns, smokers generally pay for the social costs of their habit, in part because some die before collecting pensions and Social Security, RAND Corp. researchers reported today.

But drinkers cost others in society far more than they pay back in alcohol taxes. The researchers suggested that alcohol taxes should be at least doubled in order to cover the costs that drinking imposes on society.

The costs of both drinking and smoking include higher health and disability insurance premiums, fires caused by smoking and innocent victims of drunk drivers.

The RAND study, published in the Journal of the American Medical Assn., attempts to examine the harm smokers and drinkers do to others, rather than to themselves. It then measures the cost of that damage against federal and state revenues based on current tobacco and alcohol tax rates.

The researchers found that nonsmokers tend to subsidize through insurance premiums the medical care and life insurance payments of smokers. But smokers, because many die prematurely, end up having subsidized the pensions and nursing-home care of longer-lived nonsmokers.

The study “points out that smokers, in very crass economic terms, save society dollars by kicking the bucket early--specifically, that as a group they receive less Social Security,” said Kenneth Warner, senior scientific editor on the U.S. surgeon general’s most recent report on smoking and an economist at the University of Michigan.

“That is not suggesting that anyone perceives smoking to be a good thing for that reason,” he added. He said it simply recognizes “the reduced cost of taking care of people in their old age because there won’t be as many of them around.”

The researchers estimated the “external costs” of smoking--for example, medical costs covered by health insurance premiums and payroll deductions--at 15 cents per pack of cigarettes. That figure is well below the average tobacco sales and excise tax of 37 cents per pack, they said.

When the researchers added to that equation the lives lost in fires started by cigarettes and the deaths of nonsmokers attributed to passive smoking, the external costs of cigarette smoking rose to 38 cents per pack.

The researchers calculated the external costs of drinking--for example, the damage done to others by drunk drivers--at about 48 cents per ounce of alcohol consumed. That figure is more than twice the average state’s total alcohol tax of 23 cents, they said.

“The present tax system is off,” said Willard G. Manning, the economist who headed the study. “ . . . You don’t want to pay the costs of . . . alcohol abuse and therefore provide (users) implicitly with a signal that it is OK to drink.

“The difference between smoking and drinking is that in smoking, the primary victim is the smoker himself,” added Manning, who now is at the University of Michigan. “. . . The real problem arises with drinking because of innocent bystanders (killed) by drunken drivers.”

Word of the study prompted interest this week in Washington and Sacramento, where the idea of hiking “sin taxes” has recently resurfaced as a way of bringing in revenue and of discouraging teen-agers from smoking and drinking.

Assemblyman Lloyd G. Connelly (D-Sacramento), who is contemplating a possible 1990 ballot initiative to raise the state alcohol tax rate, said the RAND findings will be especially useful because of what he called the Santa Monica think tank’s prestige.

“I think this study will add ammunition to the efforts of those who are advocating higher taxes,” said Michael F. Jacobson, executive director of the Center for Science in the Public Interest, a Washington-based consumer group lobbying to raise the federal alcohol tax.

But a spokeswoman for the Tobacco Institute also welcomed the findings.

“It’s nice to see that someone . . . recognizes that smokers do in fact pay their way,” said Brennan Dawson, assistant to the president of the trade group. She said the industry has long argued that “there is no cost to society.”

The RAND study is not the first to examine the social costs of smoking and drinking. But, rather than measuring overall costs, it differentiates between costs borne by people who smoke or drink and those who do not.

That distinction is important to rational tax policy: Taxes should not subsidize activities a society does not wish to promote, Manning said. Cigarette and alcohol tax revenues should at least cover the external costs of smoking and drinking, he said.

Manning emphasized that he was not arguing that current tobacco tax rates are appropriate simply because they appear to cover social costs. He and other experts said it is also reasonable to increase taxes simply to raise revenue or deter bad habits.

“There are lots of reasons for considering higher taxation of both alcohol and tobacco,” Warner said. “Only one of those is to cover what the economists call social costs.”

The RAND study’s estimates of the costs of smoking and drinking are lower than those in some other recent studies. For example, the federal Office of Technology Assessment concluded in 1985 that the social cost of a pack of cigarettes is $2.17.

However, that figure represented costs to both smokers and nonsmokers. Manning said his group was “pretty conservative” in the economic assumptions used in the study.

Alcohol and tobacco taxes, originally intended to raise revenue in wartime, are made up of both federal and state taxes. Until the tobacco tax initiative passed last November, California’s tax was among the lowest in the country. It is now nearly the highest.

The state’s alcohol tax rates are still among the lowest. For example, the tax on wine is 1 or 2 cents per gallon, depending on the alcohol content. The national average is 82 cents and the highest is $3, in Florida, according to the state Assembly Office of Research.