Cigarette taxes burn California.

PSST! Hey you! You wanna buy some cigarettes cheap?

Actually, Californians hear that line more than you may imagine. The state Board of Equalization last June put out a report estimating that the state lost $276 million in tobacco taxes the previous year. That's mostly because people want to avoid paying taxes on tobacco, so they buy tobacco products in low-tax states and have them sent in. More commonly, retailers--whether shop owners or car-trunk pitch men--buy loads of tobacco products that slipped through the state line or the ports and escaped the state's tax collector.

Considering that the state took in $1.1 billion in tobacco taxes last year, that $276 million represents 20 percent of tobacco taxes that should have been paid but weren't. In other words, the state loses one fifth of the tobacco tax it should collect because of evasion-evasion of a state tax that's 87 cents for a pack of cigarettes. (The feds ding each pack an additional 39 cents.)

I bring this up because Democrats in the Statehouse last week floated the idea of boosting the state's cigarette tax by $2 a pack, or $2.87. To me, that's like begging people to take up crime.

Now, their rationale is that the increased tax money would help answer the question of how to pay for statewide health care. And the higher cigarette prices would help answer the question of how to discourage smoking.

Fine, but what's seldom or never asked are questions like this: If 20 percent of tobacco sales are evaded now because of an 87-cent tax, how much will be evaded because of a tax that's more than three times as much? Would it likely be 30 percent? 40 percent? 50 percent?

While we're at it. let's ask some more questions: If the tax were tripled, how much more money could illegal cigarette traffickers make? How would that compare with smuggling marijuana? How many more people would be lured into this burgeoning illicit activity? What would be the additional cost of policing the expected bump-up in illegal activity? And what would be the increase in costs of prosecuting and incarcerating the new scofflaws?

And finally, these questions: If the evasive action went up to 40 or 50 percent, how much more tax income would the state really get? If you deducted the expenses of increased policing and prosecuting, etc., what would be the net increase then?

I'll give you a clue: It'll be far below the rosy predictions coming out of the Statehouse.

Beyond encouraging illegal behavior, an increase in the tax would hurt California's legitimate retailers, who would be stuck selling the higher-cost cigarettes.

It wouldn't help the cigarette makers and distributors either. Last week, a Philip Morris USA spokesman named David Sylvia showed me two packs of Marlboro cigarettes. One was made by Philip Morris and the other was a knockoff made in another country. To my untrained and somewhat myopic eye, the two were identical. Naturally, the cigarette makers don't want to see any more incentives handed to knockoff makers in other countries.

And that's what such a big tax would do: encourage bad behavior by making it more lucrative. That's why casually and reflexively raising taxes whenever a funding need arises is seldom a good idea.

Charles Crumpley is editor of the Business Journal. He can be reached at [e-mail].