Smoking (cigarettes) costs more than $600 billion per year, and the personal-finance website WalletHub today released its report on The Real Cost of Smoking by State to help encourage the 46 million tobacco users in the U.S. to kick this dangerous and expensive habit.
WalletHub calculated the potential monetary losses brought on by smoking and exposure to secondhand smoke, including the lifetime and annual costs of a pack of cigarettes per day, health care expenditures, income losses and other costs. The Financial Cost of Smoking in Maryland (1=Highest, 25=Avg.):
- Overall rank for Maryland: 3rd
- Out-of-Pocket Cost per Smoker – $234,242 (Rank: 2nd)
- Financial-Opportunity Cost per Smoker – $3,970,866 (Rank: 2nd)
- Health-Care Cost per Smoker – $276,449 (Rank: 5th)
- Income Loss per Smoker – $850,703 (Rank: 2nd)
- Total Cost Over Lifetime per Smoker: $5,348,819
- Total Cost per Year per Smoker: $111,434
To view the full report and your state or the District’s rank, please visit:
https://wallethub.com/edu/the-financial-cost-of-smoking-by-state/9520
WalletHub’s Methodology:
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 and multiplied that figure by the total number of days in 48 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 drains 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 caused by smoking — and divided that amount by the total number of adult smokers in each state.
Income Loss per Smoker: Previous studies have shown that smoking can lead to loss of income, either because of absenteeism, workplace bias or lower productivity due to smoking-related health problems. This can create a wage gap between smokers and nonsmokers. To represent the negative relationship between earnings and smoking, we assumed an average 18 percent decrease in the median household income for each state. We arrived at this figure after a recent survey from National Longitudinal Surveys found that smokers earn 18.1 percent less than nonsmokers.
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.
Formula for Financial Cost of Smoking: Financial Cost of Smoking = Out-of-Pocket Costs + Financial Opportunity Cost + Related Health-Care Costs + Income Loss Due to Smoking-Related Issues + Increase in Homeowner’s Insurance Premium + Secondhand Smoke-Exposure Costs.
Sources: Data used to create this ranking were collected as of December 18, 2024 from the U.S. Census Bureau, Centers for Disease Control and Prevention, Insurance Information Institute and Campaign for Tobacco-Free Kids.