Treasury says the revenue gathered through tobacco taxes exceeds the health costs of smoking, and smokers further save the government money because they don't live as long as non-smokers.
Its regulatory impact statement on tobacco taxes prepared ahead of the budget said smokers were likely to be effectively paying their way already, due to their shorter life expectancies reducing the need for superannuation and aged care.
Last week's budget laid down the law for smokers, with a 10 percent increase in excise on cigarettes each year for the next four years.
The move will produce more than $528 million.
Around $20 million will go to a new fund called Pathway to Smoke-Free 2025, which will set up programmes to discourage smoking and help users to quit.
The initiative is part of the Maori Party-led goal of becoming smoke-free as a nation by 2025. Two years ago cigarettes saw a 40 percent increase in excise, and annual inflation-linked increases have also affected the pack price.
It's generally accepted that for every 10 percent increase in tobacco prices, consumption falls by 5 percent.