Here's an example where the federal government increased taxes and lost tax revenue. How could this possibly happen? Don't ALL good liberals know that tax increases will work to bring in more money. Smokers dodge cigarette tax by switching to pipes, cigars | wbir.com The shift cost the federal government $615 million to $1.1 billion in uncollected tax revenue from April 2009 to September 2011, the report said. It did not estimate how much individual states may have lost in uncollected taxes.