Good News: Smokers Pay Their Own Way

June 16, 2011
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It is likely that cigarette taxes are near the external cost level at current rates of taxation. If the goal is for tobacco taxes to simply account for the purely external costs of smoking, then that policy goal has roughly been achieved.

It is likely that cigarette taxes are near the external cost level at current rates of taxation. If the goal is for tobacco taxes to simply account for the purely external costs of smoking, then that policy goal has roughly been achieved.

Smokers cross subsidize Social Security, as well as Medicare, meaning smokers receive less in benefits paid out, even after accounting for the fact that they pay in slightly less as compared to nonsmokers…. around 13% more 24 year old smokers than 24 year old never smokers will pay into Social Security and Medicare, albeit at slightly reduced rates, but die before they reach the age of typical eligibility for benefits.

[M]ale smokers receive $5,264 less than nonsmokers from Social Security, and $2,763 less in lifetime Medicare benefits than nonsmokers. In Social Security, smokers just get benefits for a shorter period, on average. In Medicare, they get benefits for a shorter period, but are more expensive than average while doing so.

 

Full Austin Frakt article on the costs of smoking.