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Unintended consequences, little cigar edition

August 02, 2010

One reason tax increases always disappoint politicians is that taxpayers don't just sit still and take it. They change their behavior in often unpredictable ways to keep their money.

Iowa jacked up its cigarette tax by $1 per pack. So Iowa is suddenly becoming a land of cigar smokers, reports KCRG.com:

Filtered cigars that resemble cigarettes in appearance, if not taste, are fast gaining appeal with smokers struggling under budgets strained by tobacco tax hikes.

For $1.28, shoppers at the Cigarette Outlet, 1404 First Ave. NE, could pick up a pack of 20 Wrangler brand filtered cigars last week, one of several brands available.

The filtered cigars come in a 20-pack about the size of a cigarette package, and are similar in appearance. But they cost $2.48-per-pack less than one of the more popular budget cigarette brands, Hy-Val. They’re priced a stunning $4.30-per-pack less than Marlboro, one of the mainstay cigarette brands after tax.

Naturally Iowa will respond with a "loophole closer" for filtered little cigars, setting the stage for the next round of taxpayer innovation.