Simulated effect of tobacco tax variation on latino health in California1

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Abstract

Background: Over one fourth of the California population was Latino in 1999, and by 2015 Latinos are expected to be the single largest ethnic group in California. Patterns of smoking and nicotine dependence among Latino smokers may be quite different from those of smokers in other ethnic groups. In addition, Latino smokers may be more sensitive to cigarette prices. Therefore, the effect of an increase in cigarette excise taxes on Latino smoking prevalence may be quite large, and consequently the impact on Latino health may be proportionately greater than on population health in general.

Methods: We simulated changes in Latino smoking, morbidity, mortality, and quality-adjusted life years (QALYs) that would result from a range of actual and proposed cigarette excise-tax increases using a range of cigarette price-elasticity estimates specific to Latino smokers. Monte Carlo simulation was used to generate confidence intervals.

Results: Assuming a Latino price elasticity of demand for cigarettes of −1.0, reductions in Latino smoking resulting from an additional $0.50/pack tax would produce nearly 3000 Latino QALYs in California in 1999. Greater benefits would accrue each year, until a steady state relative to population size is reached 75 years after the program is initiated.

Conclusions: If Latino smokers are more responsive to changes in cigarette prices than other smokers, Latino smokers also stand to gain a disproportionate share of the health benefit from an excise tax increase.

Introduction

Cigarette excise taxes are an attractive public policy tool for two reasons. First, they generate substantial revenue for the government unit levying the tax. Second, there is considerable evidence that a cigarette excise tax increase will reduce cigarette consumption by discouraging youth from taking up smoking, stimulating adult smokers to quit, and motivating many other smokers to reduce their daily consumption.1, 2, 3, 4, 5, 6, 7, 8, 9

The beneficial features of an excise tax, however, are coupled with a tangible cost to smokers that should not be ignored. Cigarette taxes represent a transfer—or reallocation of income—from smokers to the general population.10, 11 Whether such a transfer is appropriate depends in part on whether it compensates society for the excess costs imposed by smokers through smoking-related diseases and premature mortality. Economists refer to this criterion as economic efficiency. The efficiency of cigarette excise taxes and the social costs of smoking have been topics of considerable debate.10, 12, 13, 14, 15

It is also important to consider whether such a tax is equitable. A tax is considered inequitable if it disproportionately burdens low-income individuals, compared to those with higher incomes. It has been argued that cigarette excise taxes are regressive in two ways. First, low-income and minority smokers pay a larger portion of their income toward these taxes. Second, if low-income groups smoke more than others, in theory they would even more disproportionately finance the transfer of resources. However, research in several countries has shown that low-income smokers may be more likely than other smokers to quit smoking or to cut down in response to cigarette price increases.6, 16, 17 If this hypothesis is correct, cigarette excise taxes could be considered progressive at the population level for lower-income smokers because they would receive a larger share of the health benefits of reduced smoking.18

In this paper, we explore the possibility that cigarette excise taxes are not regressive, and expand upon this premise to estimate effects of increases of $0.50/pack and $1.00/pack on the health status (rather than the economic status) of Latino smokers in California. We concentrate on the Latino population because it comprises one fourth of California citizens. By 2015, Latinos are expected to be the single largest ethnic group in California. Further, although the reasons are not clear, previous studies have shown that patterns of smoking and nicotine dependence among Latino smokers may be quite different from those of smokers in other ethnic groups19, 20, 21, 22, 23 and that Latino smokers may be more sensitive to cigarette prices compared to other smokers.6 Thus, Latino smokers may be more likely (and more able) to quit smoking in response to cigarette price increases. We use this information to modify previous estimates of the health effects of increases in cigarette excise taxes on overall population health in California.

Section snippets

Methods

We closely followed previously used methodology to estimate the effect of increased cigarette excise taxes on population health in California; the details of our approach are reported elsewhere.24 Briefly, we used estimates from the literature of smokers’ sensitivity to cigarette price changes (price elasticity) to project the expected changes in Latino smoking prevalence that would result from a range of cigarette tax increases in California. We then translated these changes in prevalence to

Results

The base case model suggests that in the first year (Case I), the $.50 tax would produce approximately 2985 Latino QALYs. This is equivalent to 3317 QALYs per 1 million Latino smokers annually. For Case II, in 75 years, the tax would produce 4147 Latino QALYs or 4606 QALYs per 1 million Latino smokers annually. Figure 1 summarizes the yield in QALYs under different tax and elasticity assumptions. For example, under the assumption of a $1.00 tax and a −1.0 total elasticity (−0.50 participation

Discussion

Opponents of cigarette excise tax increases have consistently argued that the burden of the new tax would fall disproportionately on low-income people, many of whom are also minorities. Given the evidence that low-income and minority smokers are more sensitive to cigarette prices, however, it is arguable that these groups would quit smoking in greater numbers than higher-income or non-Latino white smokers. Building on this argument, our research suggested that the 1999 cigarette excise tax and

Acknowledgements

This study was supported by grant 6PT-2004 from the California Tobacco Related Disease Research Program.

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