Kevin Rudd has gleefully announced a policy to raise an extra $4.5 Billion from increasing the tax on smokers over the next four years. He justifies this massive tax increase on the cost to the community of treating smoking related cancers. It appears that Mr Rudd has not allowed facts to get in the way of his claims. Much research has been done into the cost of tobacco to the community and the effects of reducing rates of smoking, so the facts are there for anyone who wishes to find them.
Whilst smoking does cause serious illness in some individuals, counter intuitively, reducing rates of smoking does not result in reducing health costs. The reality is that every one of us will die and most of us will require medical care in relation to this. So when we prevent someone dying of a tobacco related illness, we are not preventing their death at all. We are merely delaying it and swapping it for another type of death. This increases the cost to the health system and tax payers for two reasons.
Firstly, many of the deaths attributed to tobacco are sudden deaths. Heart attacks, strokes and the like. These deaths are very low cost. Even the more lingering deaths like lung cancer tend to be reasonably rapid in their progression. On the other hand, chronic non-smoking-related diseases such as Alzheimer’s, diabetes and kidney failure are very expensive to treat. They can last for many years and sometimes result in people requiring long term nursing home care which is also extremely expensive.
Secondly, there is the fact that non-smokers live somewhere between seven and nine years longer than smokers. These years are necessarily at the end of life when an adult is at their least productive. These are years in which the person will require an aged pension, publicly funded support services in order to remain in their own home or nursing home care for those unable to manage. Few will be gainfully employed and contributing to the economy. They are the years when a person presents the highest burden on the pharmaceutical benefits scheme, when they will be the heaviest users of GP services. Many will require hip and knee joint replacements. Many will develop dementia.
If we are willing to ignore these increased costs of not smoking, as Mr Rudd appears willing to do, we can claim that giving up smoking saves the country money. But this is simply ignoring the reality of the situation.
Smokers are not a burden on the tax payer any more than any other members of society are. In fact they tend to be less of a burden as they tend to die younger. They pay their taxes at the same rate as everyone else and also pay an extra sizeable levy with the tobacco excise.
There is another consequence to this tax hike that Mr Rudd appears happy to ignore. That is the effect of increasing rates of poverty in those unable to give up smoking. According to the Australian Heart Foundation, only 10% of those in the highest socioeconomic groups are smokers, compared to 24% of those in the most disadvantaged groups. The burden of this extra tax is being largely borne by the poorest in our society.
Those that will be hit the hardest are those with a serious mental illness. Around 80% of people with schizophrenia smoke and most of them smoke very heavily. While many of them wish to give up the habit, few of them find they are able to do so. As the vast majority of these individuals survive on a disability pension, their income is fixed and already barely enough to survive on. This further increase will have a devastating impact on their already strained finances.
This excise tax hike may have a small effect on the numbers of smokers in Australia and as such may improve the health and extend the lives of some of these people. But it will not decrease costs to the health system or to the tax payer in general. The poorest members of our society will carry the heaviest burden and the most vulnerable people will be affected the worst.
While Mr Rudd is surely aware of all these factors, I suspect he has made one miscalculation. He has forgotten that smokers are also voters. Just as smokers are more heavily represented in the poorer sectors of society, Labour voters will also be more heavily represented amongst them. While I could not imagine any liberal voters changing their vote to labour in response to this policy, I can’t imagine many of the 17% of Australians who smoke voting for the government who has just lumbered them with this enormous impost. In what is gearing up to be a close election, this may well be the one policy decision that banishes Labour to the political wilderness.
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