NCPA - National Center for Policy Analysis

Big Government's Tobacco Habit

September 24, 1999

Big government benefits the most from cigarette sales -- even more than the tobacco companies -- notes Amy Ridenour of the National Center for Public Policy Research. Its profits dwarf the $20 billion or so Attorney General Janet Reno said smoking- related disease and disability costs the federal government annually, when she announced the federal government will pursue its own suit against manufacturers.

  • The government rakes in 53 cents per pack of cigarettes sold while tobacco companies make about 28 cents.
  • The 53 cents, by the way, doesn't include the money from the unprecedented $246 billion tobacco companies agreed to give the states.
  • It can't even be said that cigarette companies profit more than government when the government's health and welfare costs caused by tobacco use are factored in.

That's because smokers have an 18 percent to 36 percent chance of dying sooner than they would if they didn't smoke, so smokers, speaking generally, are likely to live long enough to pay bundles of taxes but not long enough to use nursing home facilities or all their Social Security and Medicare benefits.

Nationally, government saves 32 cents for every pack of cigarettes sold, not counting cigarette tax revenue. When taxes are included, says Professor W. Kip Viscusi, the former director of Harvard Law School's Program on Empirical Legal Studies, every pack of cigarettes sold in this country saves society 85 cents.

Source: Amy Ridenour, "A Federal Tobacco Lawsuit: Bad Economics, Bad Law and Bad Governing," National Policy Analysis No. 255, July 1999, National Center for Public Policy Research, 777 N. Capitol Street, N.E., Suite 803, Washington, D.C. 20002, (202) 371-1400.


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