The problem is that if you tax it the government becomes incentivized to increase attention selling.
If the money isn't destroyed you will end up in smaller scale corruption. One example that comes to mind is HK zoning fees and the government's increasing dependency there of.
Maybe I'm being naive; I work with some peers who smoke habitually. They pay a hefty tax for their habit. I don't really see the government's incentive to keep them at it to collect more taxes happening. Is it super sneaky and I just don't see it?
I think for certain "unpalatable" vice taxes, the increase in revenue is usually not worth the bad publicity. But one example I can think of regarding cigarette taxes is the increase in smuggling they cause, and as a consequence a lot of "government action" to prevent said smuggling. What ends up happening then is you get to see a glimpse of the thinking not being "lets keep people from smoking" but rather more in terms of "lost revenue" or "tax money stolen by smugglers".
On some level, if the tax is there to "discourage" people, then the fact that they're willing to buy "smuggled" goods to save a bit of money shows you that they're not discouraged enough and they're not your target audience.
Care to share the math? Prevailing opinion in Western Europe is that smokers cost a lot of money to the state and taxpayers due to them usually not dying directly but struggling with illnesses for years, which cost money to treat.
If the money isn't destroyed you will end up in smaller scale corruption. One example that comes to mind is HK zoning fees and the government's increasing dependency there of.