Some politicians and antismoking activists have argued that, because of the social costs of smoking, government should impose an even heavier tax on cigarettes than the current average of 53 cents per pack. But a careful look at the issues shows that smokers are not hurting nonsmokers — and are even helping them.

The fact that smokers are hurting themselves is a dubious reason for taxing cigarettes. Smokers know that smoking will shorten their lives and actually overestimate the risk:

• Smokers surveyed believe on average that 47 out of 100 smokers die from smoking, whereas at most 36 out of 100 die from smoking.

• Smokers estimate that smoking will shorten their lives by nine years, somewhat more than the actual reduction in life expectancy.

Smokers do raise group insurance rates for health care by the equivalent of 55 cents per pack, raise life insurance costs by 13.6 cents per pack, cause fire damage equal to 1.6 cents per pack and raise sick-leave costs by 1.3 cents per pack. But offsetting this total cost of 71.5 cents per pack are some even larger cost reductions due to smoking.

• Smokers die sooner, spending less time in nursing homes for a cost saving of 22.6 cents per pack.

• Smokers' early deaths mean they collect the equivalent of 79.1 cents per pack less in Social Security and other pensions (after adjusting for the reduction in the amount of taxes they pay because of early deaths).

• This means that smokers create a net economic benefit to society equal to 30.2 cents per pack.

This does not take into account the costs of environmental or secondhand smoke - for good reason. A recent study by the Congressional Research Service found that the evidence for health damage from secondhand smoke was inconclusive. But even assuming that the Environmental Protection Agency's high estimates of damage from environmental smoke are correct, smoking imposes no net external costs on nonsmokers.

Virtually all previous studies about the relationship between smoking and disease have failed to take into account the dramatically lower levels of tar in cigarettes in recent years, which makes smoking less dangerous. The studies are as much as 50 years out of date. - David R. Henderson.

Source: W. Kip Viscusi, "Cigarette Taxation and the Social Consequences of Smoking," Working Paper No. 4891, October 1994, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, (617) 868-3900.

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