Health Taxes to Save Lives

Executive Summary

More than 10 million premature deaths each year – about 16 percent of all deaths in the world – could be prevented by reducing consumption of three products: tobacco, alcohol, and sugary beverages. Without action today, the disease burden attributable to these products is going to rise, especially in low-and middle-income countries which can ill afford the associated productivity losses, healthcare costs, and household impoverishment.

Tobacco is the largest and best-documented health risk of the three products, accounting for 8 million deaths a year. Almost 3 million people die each year due to alcohol consumption. Sugar consumption is implicated in the growing burden of disease from obesity and diabetes that accounts for some 6 million deaths each year. Reducing sugary beverage consumption is a first step toward developing new strategies to address this latter threat to population health.

Most of these deaths occur in low- and middle-income countries, where rising incomes and sustained industry efforts at marketing are making these products more available and more affordable. As a result, consumption of all three products is rising.

Well-designed excise taxes are highly effective at reducing consumption of tobacco, alcohol, and sugary beverages. The response to price increase tends to be larger among the less wealthy and the young, benefiting them disproportionately in terms of health. Taxing these three products is justified not only by the large and growing health and economic costs they impose on users but also by strong economic arguments regarding market failures, negative externalities, and fiscal efficiency.

Indeed, few interventions have the power to save as many lives as raising tobacco, alcohol and sugary beverage taxes. And additional revenue that can be obtained from such tax increases, while secondary to the health gains, are substantial.

If all countries increased their excise taxes to raise prices on tobacco, alcohol, and sugary beverages by 50 percent, over 50 million premature deaths could be averted worldwide over the next 50 years while raising over US $20 trillion of additional revenues in present discounted value. Raising taxes and prices further in future years would save additional lives and raise even more revenues.

Nevertheless, governments face strong opposition to raising taxes on tobacco, alcohol and sugary beverages from producers and their allies who persistently raise concerns about the impact of tax increases on revenues, employment, illicit trade, and the poor. Evidence from around the world demonstrates that these arguments are either false or greatly exaggerated, and none justify inaction. To the contrary, excise tax policy is an underutilized yet highly effective policy measure to reduce tobacco, alcohol, and sugary beverage consumption and reap huge health benefits.