Smoking is burning a whole through your wallet

Smoking is burning a whole through your wallet every time you light up. Photo provided


REGION – Smoking cannot only ruin your health; it can also burn a nasty hole through your wallet. The economic and societal costs of smoking-related issues are just as staggering. Every year, Americans collectively spend more than $300 billion, which includes “nearly $170 billion in direct medical care for adults” and “more than $156 billion in lost productivity due to premature death and exposure to secondhand smoke.” Unfortunately, some people will have to pay more depending on the state in which they live.

To encourage the estimated 36.5 million tobacco users in the U.S. to kick the dangerous habit, WalletHub’s analysts gauged the true per-person cost of smoking in each of the 50 states and the District of Columbia. We calculated the potential monetary losses — including both the lifetime and annual cost of a cigarette pack per day, health care expenditures, income losses and other costs — brought on by smoking and exposure to secondhand smoke. Read on for the complete ranking and analysis, expert commentary and a full description of our methodology.

In order to assess the impact of tobacco use on a smoker’s finances both over a lifetime and in a single year, WalletHub’s analysts calculated the potential monetary losses — including the cumulative cost of a cigarette pack per day over several decades, health-care expenditures, income losses and other costs — brought on by smoking and exposure to secondhand smoke.

For our calculations, we assumed an adult who smokes one pack of cigarettes per day beginning at age 18, when a person can legally purchase tobacco products in the U.S. We also assumed a lifespan thereafter of 51 years, taking into account that 69 is the average age at which a smoker dies.

Out-of-Pocket Costs

To determine per-person Out-of-Pocket Costs Over a Lifetime, we took the average cost of a pack of cigarettes in each state, multiplied that figure by the total number of days in 51 years. For Costs per Year, we multiplied the average cost by 365 days.

Financial Opportunity Cost

To determine the per-person Financial Opportunity Cost, we calculated the amount of return a person would have earned by instead investing that money in the stock market over the same period. We used the historical average market return rate for the S&P 500 minus the inflation rate during the same time period to reflect the return in present-value terms.

Health-Care Cost per Smoker

Direct medical costs to treat smoking-connected health complications are one of the biggest financial detriments caused by tobacco use. To calculate related health-care costs, we obtained state-level data from the Centers for Disease Control and Prevention — namely the annual health care costs incurred from smoking — and divided that amount by the total number of adult smokers in each state.

Income Loss per Smoker

Previous studies have demonstrated that smoking can lead to loss of income — either because of absenteeism, workplace bias or lower productivity due to smoking-induced health problems — and create a wage gap between smokers and nonsmokers. To represent the negative relationship between earnings and smoking, we assumed an average 8 percent decrease in the median household income for each state. We arrived at this figure after accounting for the fact that, according to a recent study from the Federal Reserve Bank of Atlanta, smokers earn 20 percent less than nonsmokers, 8 percent of which is attributed to smoking and 12 percent to other factors.

Other Costs per Smoker

Nonsmokers are generally entitled to a homeowner’s insurance credit of between 5 and 15 percent, according to the Independent Insurance Agents & Brokers of America. Given that fact, we assumed an 11.1 percent increase (i.e. the inverse of a 10 percent credit, or the average between the two percentages) in the average homeowner’s insurance premium for each state to represent the penalty cost for smokers.

We then took into account the costs for victims of secondhand-smoke exposure. To calculate these costs, we used the per-nonsmoker expenditure in the state of New York as a proxy. We then multiplied that figure by the number of nonsmokers in each state to obtain the total costs of exposure to secondhand smoke at the state level. Finally, we divided the resulting total by the number of smokers in each state. This approach assumes that, in a perfect society, smokers would also pay the costs related to the harmful smoke that tobacco releases into the air.

  Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Bureau of Labor Statistics, Centers for Disease Control and Prevention, Insurance Information Institute,, Federal Reserve Economic Data (FRED), Kaiser Family Foundation and the Independent Insurance Agents & Brokers of America.

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