When Are Cigarette Taxes Too High?

Smokers are among the only groups for whom New York City rolls up its trademark welcome mat. In 2003, the city banned cigarettes in virtually all workplaces, restaurants and bars as part of Mayor Michael Bloomberg's crusade to bolster public health. The initiative inflamed smokers, but many ultimately accepted the logic of tempering the habit to preserve their neighbors' lungs. But now, New York City smokers are suffering a new assault — on their wallets. A hefty new state tobacco tax implemented this week has smokers fuming. The $1.25 per pack hike brings New York's state surcharge on cigarettes to $2.75, which, coupled with the city's own $1.50 tax, means Big Apple smokers are footing the highest tobacco taxes in the nation, with the the price of packs soaring past $9 in some city convenience stores"We are so demonized," says Audrey Silk, head of the advocacy group NYC Citizens Lobbying Against Smoker Harassment. "It's pushing buttons people didn't even know they had." Silk says smokers will look for ways to sidestep the surcharge. She rolls her own cigarettes, and her boyfriend gets cheaper smokes in Pennsylvania. Others are expected to circumvent New York's stratospheric prices by purchasing cartons in Indian casinos and on the Internet. The effect will be "the creation of a black market for a legal product," says Robert Levy, a senior fellow at the Cato Institute.

That's just one of the reasons Levy, a nonsmoker, argues that tobacco taxes are ill-advised. He contends the tax is both regressive — since smokers tend to represent a lower-income demographic — and punitive. "The social costs of smoking are already covered by existing taxes," he says, a calculation that includes treatment of cancer, lung disease and the vast array of other health problems directly linked to cigarettes.

New York City's health commissioner disagrees. "Tobacco remains the leading preventable cause of death in the U.S., and tobacco taxes are the most effective way to reduce tobacco use," says Dr. Thomas Frieden. For health officials, setting an outlandish price for cigarettes was precisely the point. Frieden says the price elasticity of tobacco is "rigorously defined": as costs rise, people stop smoking. New York officials calculate the newly minted tax will spur 65,000 city smokers — including 7,000 youths — to kick the habit, preventing more than 20,000 premature deaths. The initiative, Frieden says, is the logical coda to a highly successful anti-smoking program that he says has already reduced adult smoking levels 21% since 2002 and halved youth smoking since 2001, preventing 100,000 premature deaths. New York's figures are extrapolated from existing reports, including one by the Campaign for Tobacco-Free Kids, which notes cigarette sales have plunged in every state that has adopted more onerous tobacco taxes.

Frieden denies taxes exceed social costs, noting the state spends roughly $8.2 billion annually on treating sickened smokers. Tobacco taxes are widely popular, he argues: "[They] may be the only tax that most members of the general public are in favor of." Count politicians among its champions as well. Even in state legislatures stifled by partisan gridlock, lawmakers agree tobacco taxes are a vital way to replenish their coffers. Since 2002, 43 states have hiked smoking surcharges, which last year hauled in $14.5 billion nationwide. New York state expects to accrue $265 million from the tax.

Silk and Levy suggest finding a fresh revenue stream is the main point. "This is a money grab on the part of the state of New York," Levy told TIME. "[It's] really about budgetary concerns. They camouflage it in health lingo because it sells better."

"Tobacco taxation is a way of promoting both public health and increasing government revenues," Frieden says, noting it's just one aspect of the city's multi-pronged effort to curb smoking — which also encompasses cessation planning, nicotine patch giveaways and advertising campaigns touting better ways to spend $3,000 (roughly, the annual cost of a pack-a-day habit). "Fundamentally, tobacco taxation is good because it saves lives," Frieden says. But that logic isn't persuading those who think government should refrain from legislating personal choice. The debate will keep on smoldering