Taxes on cigarettes earmarked for medical care could act as user fees that reverse the fiscal externality. The problem is that governments end up setting these taxes too high. The benefits to non-smokers and costs to smokers in Canada have been calculated by several researches. That is, smokers paid in taxes between 22.2 and 12.3 times what they cost the system. All of these estimates are sensitive to the assumptions made about what diseases tobacco causes and whether or not to count, for example, pension money foregone by the premature death of smokers as a reimbursement from smokers to non-smokers.
Researchers have, if anything, tended to excess in attributing diseases to smoking.
Even under a range of assumptions that cover many possible scenarios, it seems that smokers pay more than they use. To believe that government served the public interest by taxing the fiscal externality from smoking one would have to see taxes on cigarettes being lowered from their present levels. One would also have to see that government is consistent in its views about fiscal externalities. This would mean that governments would tax fatty foods at many times the rate they now tax them. Renowned Oxford epidemiologists Sir Richard Doll and Richard Peto found that diet, and in particular fats, contributed more to deaths from cancer than did tobacco.