Tobacco Tax Debate

Well, may be not exactly a debate, but an intriguing thought presented by this Economist's blog:

Actually New York is now leading the pack; the price of 20 cigarettes in New York City now tops $10.
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The price increase comes from an increase in the federal excise tax on cigarettes, up to $1.01 from 39 cents. The revenue will go toward children’s health care. Taxing cigarettes seems like a good idea, but it can be a false economy. This particular tax increase is federal so cigarettes prices will go up nationwide, but coupled with the city taxes, prices in New York are now more than twice the national average. Increasing state or city taxes on cigarettes can decrease tax revenue and not have the social benefit of discouraging smoking. At a certain point, smokers will just drive to North Carolina and stock up on cigarettes there. Also a tax on cigarettes is highly regressive because many smokers earn a low income.

Argument is partly based on the concept of the Laffer curve, that taxes can only increase up to a certain point before you starting to see a drop in revenue. This is logical because smokers will stop buying cigarettes if they get to be too expensive. What's too expensive? Well, that depends on your utility, though that's besides the point.

The point I'm trying to make is that it depends on what is the government's motive(s). For some reasons, the government cannot ban the sales of cigarettes. In an effort to deter smokers to quit the habit, the government choose to increase the sales tax of cigarettes. It is working, so far. In addition, laws such as banning smoking in public spaces work together with the increase in taxes. If this is the government's goal, then "Job well done!" But if the government also wants to have their cake and eat it too, then they'd have to stop increasing the tobacco taxes at some point.