Health Taxes to Save Lives: Employing Effective Excise Taxes on Tobacco, Alcohol, and Sugary Beverages

For this report, the researchers on the Task Force on Fiscal Policy for Health reviewed the evidence on the impact of tobacco, alcohol, and sugary beverage excise tax policy on consumption, health, and revenue outcomes. In addition, the Task Force commissioned an analysis of the potential impact of significant excise tax increases on these products. Based on this work, there were five key messages listed below. Within the report, the evidence behind each key message is summarized, and the recommendations on the implementation of excise tax policies to improve health were listed.

  1. Tobacco, alcohol, and sugary beverage consumption accounts for a large and growing share of premature death and disease, especially in low and middle income countries. Without action today, the disease burden attributable to these products is going to rise.
  2. Raising the price of tobacco and alcohol by increasing excise taxes reduces consumption and saves lives, while generating additional tax revenues. Evidence is accumulating that excise taxes on sugary beverages can do the same. Yet, these taxes are underutilized as a policy tool.
  3. The economic rationale for raising excise taxes on tobacco, alcohol, and sugary beverages is well established. The markets for these products are characterized by significant market failures that result in harmful consumption, preventable deaths, and large economic costs to society.
  4. Implementing taxes on products that harm health is a test of government effort and resolve. Affected industries vigorously oppose tax increases with false or misleading statements related to revenues, employment, illicit trade, and impacts on the poor. Most of this criticism fails to stand up to analysis; none of it justifies inaction.
  5. Raising taxes on tobacco can do more to reduce premature mortality than any other single health policy. Raising taxes on alcohol will also significantly reduce premature deaths and disability. Raising taxes on sugary beverages is prudent because taxes can incentivize healthier diets and address the growing burden of disease from obesity and diabetes. Taxes on all three products would raise valuable revenues.

A background paper, case studies, and briefs were also prepared as a supplement to this report.