If you happen to live in New York or buy your cigars there, you better enjoy them while you can, because effective August 1, 2010, the taxes on cigars will see a significant increase.

As it stands, New York already has one of the nation's higher taxes on Other Tobacco Products (OTP) at its current rate of 46 percent of the wholesale price. Thanks to a recent vote by the state's politicians, that rate will skyrocket to 75 percent of the wholesale price starting August 1. The jump is substantial, but it could have been even worse. The man in charge, Governor David Paterson, suggested a ludicrous OTP tax level of 90 percent.

The reasoning behind the increased rate is the Empire State's budget deficit of approximately $9.2 billion for the fiscal year. As usual, to help stop the bleeding, the tobacco industry was seen as an easy target. Proponents of the tax hikes claimed that they would provide revenue for the state in the neighborhood of $500 million. That is assuming, of course, that smokers will continue to buy their products within New York's state lines. To assume such seems pretty naïve.

Due to advances in technology, cigar enthusiasts can turn to shopping online. They can also hop in their car and travel to a neighboring state that has cheaper taxes. Connecticut, for example, has an OTP tax of 27.5 percent, while Pennsylvania's is impossible to beat at zero percent.

In the end, the raise in OTP tax will likely do more harm than good. Enthusiasts will likely turn elsewhere for their cigars, which will hurt tobacco shops and probably force some to close down. Meanwhile, the state will see a drop in sales, resulting in lower tax revenues, which is the opposite of what their intentions were with the rate increase. It sounds like a lose-lose situation to me, and another example of the tobacco industry being a scapegoat.