U.S. Federal tax increase on tobacco - try it again..

It's too easy for smokers in states where the state tobacco tax has been increased to go to an adjoining state to purchase a tobacco product..

Take Maryland - last year the legislature doubled the cigarette tax to $2 a pack to pay for expanded health-care coverage. Eight months late, cigarette sales have plunged 25% and the state is in fiscal distress again. 30 million fewer cigarette packs have been bought in the state so far this year. Residents of Maryland's Washington suburbs can shop in nearby Virginia where the tax is only 30 cents a pack and save at least $15 per carton. In New York City and New York State where the tax has been increased several times, three out of four cigarettes are bought elsewhere or are contraband. Out-of-state purchases, tax-free Indian reservation or Internet sales and a cigarette black market are booming.

State Legislature passes surprise bill to tax Indian cigarettes by Tom Precious - News Albany Bureau, The Buffalo News, 8/13/2008. Cigarette-maker Philip Morris, supports a New York state Assembly bill that would solve a long battle over collecting taxes on cigarettes sold by Indian reservation stores by making wholesalers pay the levy, a company spokesman said on Thursday, 8/14/2008.

It's been rumored that the Democrats in congress are planning one more pre-election go at the $35 billion children's health program expansion (State Children's Health Insurance Program (SCHIP)) funded by a 61-cent per pack tax increase and including a tax on other tobacco products.

According to the World Bank, price increases are the most effective and cost effective tobacco control measure, especially for young people and others on low incomes, who are highly price responsive. A price rise of 10% decreases consumption by about 4% in high-income countries.

Reference: Cigarette Tax Burnout, The Wall Street Journal, 8/11/2008, pg A14.