From Yahoo is this story about a proposal to increase the California state per-pack cigarette tax BY $2.60$!! The resultant state sales tax on a pack of cigarettes would be $3.47. I wonder what side of the Laffer curve the state would be on in this case?

Revenue from the higher tax would be directed to various health programs, including cancer screening, prevention and research, low-cost children's insurance, and tobacco education and cessation.

Because the extra per-pack tax would be expected to curb sales, the proposal allots $159 million a year to offset any loss of revenue to programs supported by an initiative approved by voters last year. That measure added a tax of 50 cents a pack to fund early childhood education.

The initiative also would give money to local law enforcement to enforce tobacco control laws, which critics said would be needed to offset an expected rise in black-market cigarettes.

Okay. So the tax costs $159 million to the early childhood education programs - tax the smokers to pay for pre-kindergarten? - and cost valuable law enforcement efforts (these folks have little understanding of the concept of opportunity cost).

What's the benefit of the tax? The last paragraph brings in the kicker:

The tax is projected to raise $2.7 billion annually if cigarette sales remain at the current level, but the higher price is expected to cut sales by about 8 percent a year, supporters said.

Hmmm. In 2004 the wholesale price of a pack of cigarettes was around $2.40, and federal tax per pack was at $0.39. This would put the retail price in California somewhere in the neighborhood of $2.40+$0.39+$0.87= $3.66 or so (add a little bit for the convenience store owner's profit). Let's round this up to $3.75.

[The proposed California state tax would therefore be more than the wholesale price of a pack of cigarettes!! Perhaps RJR and friends should just cede the property rights of cigarettes to the states and force the government's hand.
But I digress.]

The proposed tax increase would put the price of cigarettes in California somewhere in the neighborhood of $6.35 per pack, a whopping 64% increase in price. If proponents expect the quantity demanded to drop only by 8 percent, that would put the price elasticity of cigarettes somewhere in the neighborhood of -1/8 or -0.125. Perhaps this is true in the short run (several studies of cigarette demand find short-run elasticities in this area), however such a dramatic increase in the price might easily create a more dramatic reduction in demand (or quantity demanded) as the previous estimates of price elasticity focus on a very small portion of the pertinent demand curve.