Cause and effect.(EDITOR'S NOTE)

WHEN A STATE ANNOUNCES that it is looking into the possibility of raising the excise tax on cigarettes and other tobacco products that are sold within its borders, it usually produces a list of altruistic reasons for the increase. Some of the more popular are that the money will be spent on smoking-cessation programs, for health care or on programs designed to keep cigarettes out of the hands of minors.

While I don't question that all of these are worthy causes (if the funds generated by the tax increase actually find their way to the intended targets), there are oftentimes many unintended effects of a tobacco tax increase.

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In fact, a paper recently authored by economist Richard E. Wagner of George Mason University suggested that boosting cigarette excise taxes to excessively high levels can create a "Prohibition-like environment," fostering "black-market sales, Internet smoke shops and increasing the likelihood that smokers will look for illegal ways to circumvent paying the higher fees." Wagner's paper, "State Excise Taxation: Horse-and-Buggy Taxes in an Electronic Age," argues that a high cigarette tax "pushes smokers to cross state lines to purchase cigarettes or to break the law by buying them underground," as reported by CNN Money.

CNN Money referenced a General Accounting Office report that said officials at the U.S. Immigration and Customs Enforcement Agency found states with high cigarette taxes "are typically those that lose cigarette tax revenue to smuggling." The Associated Press reported that most smuggling activity involves cigarettes imported illegally from foreign countries, but that a substantial amount "involves smuggling from low-tax states such as North Carolina and Kentucky to ...