A great number of them avoided paying the new cigarette tax and instead purchased their cigarettes from smugglers. About 80 percent of those illegal cigarettes were manufactured in Canada, legally exported to the United States and then returned illegally. In addition, cigarette smuggling became attractive to organized crime and increased the danger to law enforcement officials. It also created a hardship for the owners of small stores who relied on cigarette revenue. As a result, Canada eventually was forced to cut its cigarette tax in order to collect revenues.
Smokers Already Pay Their Way.
One argument for higher cigarette taxes is that smokers increase costs to the health care system, draining public money that could be targeted toward other populations - such as children. But the truth is that smokers already pay their own way, according to a 1989 study conducted by Willard Manning of the Rand Corporation, Joseph P. Newhouse of Harvard University and other health economists and published in the Journal of the American Medical Association . The authors estimated a number of the costs associated with smoking such as the need for medical care, higher premiums for life insurance and the increased possibility of a fire or an auto accident. While factors such as increased medical care and life insurance premiums raise the social costs of smoking, the study also factored in decreased life expectancy, which lowers costs that arise from Social Security and Medicare. According to the Rand study's authors, the combined 1989 federal and state tax of 37 cents per pack was more than double the 15 cents direct cost of smoking.