Chicago and Cook County Bring in Much Less Cigarette Tax Revenue After Tax Increase: Supply Side Economics' Revenge

The Chicago Tribune has an editorial on how higher taxes didn't provide more revenue:

When Chicago and Cook County officials hiked cigarette taxes in 2006, they expected some people would smoke less or quit. Others would buy their cigarettes outside of the county. But officials still expected that the higher tax would boost revenue.

That prediction turned out to be wrong. In both the city and county, a big chunk of cigarette tax revenues has gone up in smoke.

The city's take slid from about $32 million in 2006 to about $25 million in 2008 and is still dropping. At the county, revenue has plummeted from $203 million in 2006 to an estimated $163 million in 2009.

"In most places, tax increases lead to increased revenues," said David Merriman, a University of Illinois at Chicago economist. "Chicago would be the only place I know of where it's gone the other way."

The law of diminishing returns on taxation has kicked in . Here's the data for all to see.