The economic implications of tobacco product sales in a non-tobacco state

Listed in:

• ... on employment
• Impact of tobacco taxation

Abstract

Objective The tobacco industry claims that tobacco makes a significant economic contribution to each of the states in the United States. We sought to determine whether Michigan, a nontobacco state, would reap more economic benefits from the presence or absence of tobacco product sales. Design Computer simulation of the Michigan economy, with and without tobacco product sales, for the years 1992 through 2005. Intervention We simulated Michigan's economy with tobacco expenditures eliminated or reduced and the equivalent spending redistributed to other goods and services, according to consumers' normal spending patterns. We compare these results with baseline forecasts of the economy. Main outcome measures Numbers of jobs and tax revenues. Results Michigan would have had 5600 more jobs in 1992 had there been no expenditure on tobacco products, with equivalent spending redistributed to other goods and services (and to other taxes, to replace half of lost cigarette excise tax revenues). By the year 2005, a tobacco-free Michigan would still have almost 1500 more jobs than it will have if sales trends for tobacco products continue (ie, gradually declining over time). If, instead of tobacco expenditures ceasing, the contemporary rate of decline in tobacco consumption had doubled, the state would have had over 300 more jobs in 1992 and would have nearly 800 more in 2005. With cigarette excise tax revenues not replaced, the elimination of spending on tobacco products would have decreased Michigan's tax revenues by $254 million in 1992. The more realistic doubling of the expected decline in smoking would have decreased revenues by $14 million that year. Conclusions Reducing or eliminating tobacco product spending in Michigan will increase employment in the state, as well as health.