The problem with taxing vices too heavily is that it incentives a black market to emerge... and all the crime that comes with it. Australia is a great example of a place where this is causing a lot of problems.
You and I can theorize how black market analogs might somehow exist, but they wouldn't have 1% of the reach they currently enjoy.
I also think that conspicuous consumption in the form of yachts and $40,000 handbags is, in truth, a vice -- and one that can generate a lot of tax revenue, and only be black-marketed away with severe difficulty.