Chicago
Once legal tobacco is taxed so heavily that illicit tobacco becomes 80% of consumption, government policy has stopped being a health intervention that it never was.
In Australia, nicotine consumption rose 40% from 2017 to 2025, legal cigarette costs tripled, illegal prices stayed relatively constant and tobacco tax revenue fell to its lowest level in 14 years by 2025.
That is not a well-functioning deterrence system. It is a criminal black-market subsidy created by tax policy.
The deeper pathology is that governments like problems they can monetise.
Tobacco, gambling, alcohol, speeding fines, stamp duty, energy regulation and licensing systems all drift toward the same structure: moral justification, revenue extraction and bureaucratic dependency.
Once the revenue stream exists, the government has no clean incentive to eliminate the “problem”.
So the honest version would be:
• If the goal is public health, measure nicotine use not just legal sales.
• If the policy increases total nicotine consumption, it has failed.
• If the policy shifts consumption from regulated products to criminal supply, it has failed.
• If enforcement costs rise while tax revenue falls, it has failed twice.
• If politicians keep defending it because the stated intention sounds virtuous, they are dickheads.
The crude version is simpler: they taxed vice until vice found a cheaper dealer.
We used to call that prohibition, which always fails, no matter how you structure it.
offshore westerly 