The main purpose of this study was to estimate the tax revenue lost by state and federal governments as a result of adverse labor market outcomes attributable to opioid misuse.
We pair existing, plausibly causal estimates of the effect of opioid misuse on the decline in the labor force from 2000 to 2016 with a variety of data sources to compute tax revenues lost by state and federal governments using the online TAXSIM calculator.
We find that between 2000 and 2016, opioid misuse cost state governments $11.8 billion, including $1.7 billion in lost sales tax revenue and $10.1 billion in lost income tax revenue. In addition, the federal government lost $26.0 billion in income tax revenue.
By omitting lost tax revenue due to labor force exits, prior studies have missed an important component of opioid-related costs borne by state and federal governments.
As more states and the federal government contemplate litigation for opioid-related damages, lost tax revenue represents an important cost that could be recouped and allocated to opioid prevention and treatment programs.