Tax Revenue Goes Up In Smoke
Last summer, lawmakers in Indiana raised the state's cigarette tax from 15 cents a pack to 50 cents, to help balance the state budget. Four months into the fiscal year, revenue from the cigarette tax is up - but not by as much as the state had hoped.

"The state is collecting more money in cigarette taxes compared to last year, but collections are down from where state budget makers thought they'd be when the legislature increased the tax," reports WISH-TV in Indianapolis.

"In the first four months we've been down about $17.8 million below what we expected, " said Budget Director Marilyn Schultz.

What's happening? The little guy is getting hurt by the tax increase, as usual. Indiana stores that sell cigarettes have lost business, while the state has raked in more money from some customers and driven others to avoid the higher tax by going out-of-state or online to buy their cigarettes.

"The state budget director says more people have stopped buying cigarettes in Indiana," reports WISH-TV in Indianapolis.

Why do state revenue forecasters tend to forget that when taxes are raised, taxpayers alter their behavior? The decline in cigarette purchases in Indiana after the cigarette tax was more than tripled was entirely predictable, except to Indiana revenue officials apparently.