States have raised tobacco taxes to pay for stop-smoking campaigns, health programs or simply to fund the general treasury, but some are now seeing tax revenues fall off as more people quit smoking, the Associated Press reported Feb. 11.

Even as taxes have increased, states taxed 2.8 billion fewer packs of cigarettes in 2005 than they did in 2000. In 2004, states collected $13 billion in tobacco taxes, but states like Minnesota are projecting that tax collections will start to fall about 1 percent a year -- about $4-5 million annually in Minnesota.

California banned most indoor smoking in 1998 and raised its tobacco tax by 50 cents per pack in 1999. Initially, tobacco tax revenues jumped, then leveled off. The state has been able to maintain tax collection rates at about $1 billion by aggressively fighting counterfeiting.

"We're a tax collection agency -- we are not predictors of the habits of people," said Anita Gore of the California Board of Equalization. "But if smoking continues to decline, then revenues would continue to decline."

"The wonderful thing about tobacco revenues is when they go down, there's less smoking," said Eric Lindblom of the Campaign for Tobacco-Free Kids. Plus, state spending on tobacco-related healthcare -- estimated at $2 billion annually in Minnesota alone -- is expected to decline along with smoking rates.