This week, Mayor Michael Bloomberg and former Treasury Secretary Lawrence Summers announced a new Task Force on Fiscal Policy for Health. This is not a task force about economic health but about human health. In particular, it is focused on preventing cancers, diabetes, and cardiovascular diseases, and on saving lives, by considering how taxes can effectively discourage major risk behaviors, namely smoking tobacco and consuming excessive amounts of alcohol and sugar. This is the first time such a high-level group of respected economic and fiscal policy opinion leaders has convened on this issue, creating an opportunity to acknowledge the importance of taxes for promoting health and to take action to save lives.
There is something fitting about discussing death and taxes in the same venue. After all, Benjamin Franklin put the two together in his famous quip that “there is nothing certain, but death and taxes.” Would he have been surprised to learn they are related? That is, in some cases, taxes can actually postpone death?
Even Adam Smith wrote that “Sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.”
But most economists today—and especially those involved in fiscal policy—are skeptical of tax policies that single out particular commodities for special treatment. Such skepticism is useful for avoiding unnecessary distortions in tax policies, but this skepticism becomes an obstacle when it leads us to ignore cases for which taxes can effectively solve a large-scale problem in distorted markets.
That’s where this Task Force comes in. While it includes world leaders in public health, most of the members are leading economists, finance ministers, and politicians from outside the world of public health who are open to considering how excise taxes can be a sensible part of fiscal policies. Masood Ahmed, CGD’s president and a former director at the IMF, will be in the Task Force which also includes Ngozi Ikonjo-Iweala (former Nigerian Finance Minister), Minouche Shafik (head of the London School of Economics), Nicola Sturgeon (First Minister of Scotland) and Mauricio Cardenas (Colombia’s Finance Minister), among other prominent intellectual and political leaders.
During the year, Task Force members will hear about extensive research showing that tobacco taxes are extremely cost-effective at reducing smoking and tackling the 7 million premature deaths attributable to this epidemic. They’ll hear the evidence, which is also strong, on how taxes affect alcohol consumption and its associated annual death toll of 3.3 million. And they’ll weigh new research from studies assessing the potential effectiveness of taxing sugar in relation to the growing numbers of people affected by diabetes and cardiovascular disease. When they’re done, they will have solid proposals to bring to their peers at governments around the world on using taxes to improve health while raising revenues.
I’m pleased to have participated in discussions leading to the formation of this Task Force and to be part of the team supporting their deliberations. I enter this process hopeful that the Task Force will be able to open minds around the world regarding the economic rationales behind taxing harmful products and making fiscal policies an effective instrument for a better world. Finance Ministers may not realize it yet, but the strongest tools for saving lives are actually in their hands.