Tobacco Sales Show Pitfalls of Tax Increases?

Monthly sales of pipe tobacco increased
from about 240,000 pounds in January 2009 to more than 3 million pounds last
September, while roll-your-own tobacco dropped from about 2 million pounds to
315,000 pounds.

It’s not hard to figure out why: The Children’s Health Insurance Program
Reauthorization Act (CHIPRA) of 2111 boosted taxes on roll-your-own products far
more than on pipe tobacco.

That means users could purchase pipe tobacco to roll into cigarettes to avoid
the higher taxes. And since the Internal Revenue Code does not specify
“distinguishing physical characteristics” differentiating the two products,
according to the General Accounting Office, sellers can market roll-your-own
tobacco as pipe tobacco to skirt the tax increase.