So in the name of improving health care, government has increased its stake in making sure that lots of people continue to smoke. The Baptists in the ongoing "punishment" of tobacco companies are the majority of Americans who want to help children and hurt Big Tobacco. The bootleggers? Well.

They include the trial lawyers, who are still harvesting billions from their participation in the Master Settlement Agreement of 1998, under which tobacco companies agreed to pay $206 billion over 25 years to compensate states for the costs of caring for people with smoking-related illnesses. Other bootleggers included the "punished" tobacco companies.

Most of their increased tax burden is paid by the 21 percent of Americans (disproportionately low-income people) who smoke. They pay most of the tax, which is passed along in the price of a pack. And although price increases have decreased the tobacco companies' sales, the settlement makes it difficult for generic brands to expand their market share or for new entrants to enter the cigarette market. So Big Tobacco's profit margins and profits have increased.

And now Washington is, like the states, addicted to tobacco-tax revenues. So Washington must carefully calibrate the tobacco tax, keeping it high enough to provide a reliable revenue stream for ongoing programs, but not so high that it jeopardizes those programs by depressing smoking "too much." The average state tax is $1.19 per pack, and at least 16 states are thinking about increasing their tobacco taxes to help their ailing budgets. But because of the increased federal tax to fund SCHIP, states have less latitude to increase their tobacco taxes.

State taxes range from 7 cents per pack in South Carolina to $2.75 in New York. Surely there is a black market in New York selling cigarettes trucked in from South Carolina. What should we call the people running that market? Bootleggers.

© 2009