The problem with taxing it up the wazoo is that you get the same kind of criminal activity associated with it as when it's illegal.
A while back in California, there was a strongarm robbery of a cigarette warehouse, where the security guards were held at gunpoint, tied up, and gagged, and the bandits made off with millions of dollars worth of tax stamps - a few rolls - along with several pallets of cigarettes.
There's also rampant cigarette smuggling and black marketeering between states with low and punitive cigarette taxes.
When I say "up the wazzoo", I mean just high enough that you don't get the black market. They might be at that point with cigarettes.