13.10 A regressive tax?
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Increases in tobacco taxes are sometimes described (especially by the tobacco industry) as being 'regressive', in that their effect is most strongly felt among the poorer groups in the community. Since it is precisely the poorer, less educated and younger population sub-groups which provide a large proportion of the tobacco industry's market, it could equally be argued that the tobacco industry itself is regressive.
The most price-sensitive sections of the population, which include children and teenagers and lower-income consumers, are the most responsive to price increases in tobacco. Since presumably no-one would argue that it is inappropriate to price tobacco beyond the pockets of children, the issue of regressivity relates to impact on lower socioeconomic, adult sections of the community.
Tobacco use is more prevalent and quit rates are lower among low compared with high socioeconomic groups.233, 234 These is no doubt that this creates a large financial burden in many low-income households235-238—see Chapter 2, Section 2.4.2—and in particular in many Aboriginal communities.239, 240 [62] Against this are a number of important considerations.
- Smoking, within the limits of addiction, is discretionary. Tobacco is used by only one fifth of the adult population, including less than one third of low-income adults—see Chapter 1, Section 1.7, and cannot be considered a staple item. The tax can be avoided by remaining a non-smoker, or giving up smoking, and those who quit smoking realise substantial financial savings immediately. Even the most addicted smokers unable or unwilling to quit are able to reduce consumption to at least some extent.
- Due to their higher smoking rates, a disproportionate amount of ill-health and premature death due to smoking-caused illness is experienced by lower socioeconomic groups. These groups stand to gain most in health terms from tax increases that provide an additional incentive to quit.
- Raising tobacco taxes is beneficial in revenue terms for government and revenue from increases can help to cover the cost of comprehensive smoking control programs including campaigns, services and treatments to assist smokers or the cost of other programs that benefit low-income groups.
- Taxation increases have been considered an appropriate tool for prevention by major health organisations, and have increased in community support in Australia, particularly if the taxes are used to promote health education—see Section 13.13.
It is clear that increases in tobacco taxes are most felt among poorer sub-groups:241 that is what makes them an effective preventive tool. The key issue in determining whether tobacco taxes are regressive is the extent to which people in various socioeconomic groups actually do reduce tobacco consumption in response to price increases. Early research suggests that people on lower incomes tend to be more price-sensitive than higher income groups.32, 34 Analysis of British data from the 1980s for instance, has shown that men and women in lower socioeconomic groups are more likely to reduce their cigarette consumption because of price increases, than in response to health publicity about tobacco.32 Considered from this angle, tobacco taxes can be described as progressive in their deterrent effects on uptake or influence on quitting. Analysis of more recent US data challenges this view, finding that low-income smokers in the US are now less likely than middle or high-income smokers to quit following price increases, and that among remaining smokers, consumption is likely to fall equally among all income groups.241 However, the preponderance of evidence is still firmly that low-income smokers are more price-sensitive. In Australia falls in reported consumption have been highest in upper-white-collar groups. However, reported consumption has fallen as much in lower and upper-blue-collar smokers as it has in remaining smokers from lower white-collar groups—see Chapter 2, Section 2.5. For further discussion of smoking among disadvantaged groups see Chapters 8 and 9.
[62] Among Aboriginal peoples and Torres Strait Islanders, there is anecdotal evidence that families are going without food in order to purchase tobacco.
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