Tobacco taxes and health care costs. Do Canadian smokers pay their way?

Through their health care utilization, smokers are generally perceived to be imposing a financial externality on non-smokers within health insurance systems. To investigate the empirical basis for this view, we estimated publicly financed health care expenditure attributable to smoking for the Canadian province of Ontario and compared it to tobacco taxes paid by Ontario smokers. Both initial estimates and the results of sensitivity analyses performed on key assumptions and parameters of the estimation methodology rejected the hypothesized existence of a financial externality arising from smokers' health care utilization.