Opioid epidemic may have cost U.S. $37B in tax revenue

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The opioid epidemic may have cost state and federal governments in the United States up to $37.8 billion in lost tax revenue due to opioid-related employment loss, according to a new study.

Additionally, the researchers found that Pennsylvania was one of the states with the most lost revenue, with approximately $638.2 million lost to income and sales tax. The study looked at data between 2000 and 2016.

The results, which appear in the journal Medical Care, could help governments hoping to make up for lost revenue, says Joel Segel, assistant professor of health policy and administration at Penn State.

“This is a cost that was maybe not thought about as explicitly before, and a cost that governments could potentially try to recoup,” Segel says.

“Instead of focusing on the cost of treating people with opioid use disorder, you could think about it in terms of a potential benefit to getting people healthy, back on their feet, and back in the workforce.”

Previous research estimated that in 2016, nearly 2.1 million Americans had an opioid use disorder, and approximately 64,000 deaths resulted from an opioid overdose. According to the National Institute on Drug Abuse, Pennsylvania alone saw 2,235 opioid-related overdose deaths.

While previous studies have looked at the cost of the opioid epidemic in terms of substance abuse treatment and other medical costs, Segal and the other researchers wanted to explore other costs that previous studies had not captured.

“We wanted to take a systematic approach to how we could think about some of the tax revenue that is lost if someone is unable to work due to opioid use,” Segel says. “This could be an important consideration for either state or federal budgets.”

The researchers used National Survey on Drug Use and Health data, as well as information from a previous study that estimated declines in the labor force due to the opioid epidemic. They used the National Bureau of Economic Research’s TAXSIM calculator to estimate losses in tax revenue.

An analysis of data from 2000 to 2016, showed an estimated decline of 1.6 million participants in the labor force, with about 68,000 of those in Pennsylvania and about 180,000 overdose deaths, with approximately 6,100 occurring in Pennsylvania.

Additionally, the researchers estimated losses of $11.8 billion to state governments and $26 billion to the federal government in tax revenue due to reductions in the labor force. For state governments, this included lost sales tax and income tax revenue. Lost income tax revenue accounted for all the losses to the federal government.

The results help show the value of treating people with opioid use disorder, and should play into treatment program considerations and evaluations, Segel says.

“The state of Pennsylvania has been developing some innovative programs, and our results are something to consider as these programs are being considered for implementation,” Segel says.

“Not only are treatment programs beneficial to the individual and to society, but if you’re thinking about the total cost of these treatment programs, future earnings from tax revenue could help offset a piece of that.”

The Commonwealth of Pennsylvania supported the study.

Source: Penn State