The ink is hardly dry on the new state budget, but we already know the plan did not address enough of the state’s structural imbalance between spending and revenue. After raising taxes this spring, new taxes were not part of this latest round, thanks to the message voters sent during the May special election. But with Democrats saying that they’ve cut all they can cut, you can be sure that new proposals for tax increases will not be long in the offing.

What can we expect? I suspect we’ll see a new round of calls for so-called “sin taxes,” especially on smokers. After all, the tax raisers and government spenders figure, most people don’t smoke, so they’ll back this tax.

Why should non-smoking taxpayers like me care? It’s easy. Sin taxes almost never raise the revenue projected, but the appetite for the program they purport to finance doesn’t go away. Eventually, you know and I know, the taxers will come looking for new revenue, and we’ll all pay.

It goes like this:

The goal of a tobacco tax is two fold, as proponents admit. One is to fund new or existing government programs. But the other is to raise the price of tobacco products so that people quit using. The problem is that these goals work at cross purposes. If people quit smoking, then the tobacco tax revenue goes down, and the funded program, or government in general, is looking for revenue elsewhere. It’s the twisted logic behind Chris Buckley’s genius – Thank You for Smoking!”

There’s another element to this. Raising tobacco taxes encourages less desirable behavior as well, from buying cigarettes over the Internet to counterfeiting tax stamps and shipping truckloads of cigarettes across the country to avoid California taxes.

Economists will tell you there’s a limit to what consumers will pay for any product, including cigarettes. When taxes drive the cost beyond that limit, consumers will find a way to avoid paying those taxes. That’s the basic theory of researchers at the Mackinac Center for Public Policy who analyzed the experiences of states that raised tobacco taxes.

New Jersey saw revenues from its tobacco tax fall after increasing the tax to the second highest in the nation. When the tax on a pack of smokes reached $2.57, New Jersey smokers discovered easy ways to avoid paying the tax by buying cigarettes over the Internet, on an Indian reservation, or in any number of states within a day’s drive where taxes are as low as $.07 per pack.

Closer to home, and before the Internet was even a figment of Al Gore’s imagination, military bases were the best place to find cigarettes untaxed by the states. In 1967, California tripled its tax to $.10 per pack. Legally taxed retail sales dropped seven percent while cigarette sales on military bases exploded – the equivalent of 725 packs a year per servicemember compared to 123 packs per civilian.

In 1999, the California Board of Equalization (BOE) estimated that the tax increase mandated by Proposition 99 in 1988 significantly increased smuggling in the state. During the 1990 fiscal year, between 183 million and 377 million packs of cigarettes illegally entered California – the equivalent of four full tractor-trailers each day – and the state lost between $64 million and $132 million in tax revenue.

Smuggling increased again in 1999 after Proposition 10 and the national Tobacco Master Settlement Agreement raised cigarette prices $.45 a pack. By 2006, one of every three cigarettes consumed in California were untaxed. BOE’s current estimate of cigarette tax evasion is $182 million annually plus $94 million in taxes on other tobacco products.

The potential for illegal profits from smuggled cigarettes is enormous. According to the U.S. Department of Alcohol, Tobacco, Firearms and Explosives, smugglers can net as much as $34,000 from a single carload of cigarettes, $170,000 from a vanload and $680,000 on a U-Haul loaded with cigarettes and transported from a low-tax state to a high-tax state.

Cigarette smuggling has been tied to a number of serious crimes. Federal law enforcement authorities say profits from cigarette smuggling have been used to finance terrorist organizations and have led to truck hijackings, theft of state tax stamps, counterfeiting of tax stamps, counterfeiting of name-brand cigarettes and violence against police officers and innocent citizens. Convenience stores have become more attractive targets for armed robbers due in part to the value of stolen cigarettes.

Sacramento politicians think they’re being clever when they try to fund government on the back of sin taxes. But the alteration of the market caused by over-taxation has consequences policymakers need to consider. Their hopes of new revenue from smokers will likely go up in smoke.