Here is an NYT summary of what it means:
…the law would give the F.D.A. power to set standards that could reduce nicotine content and regulate chemicals in cigarette smoke. The law also bans most tobacco flavorings, which are considered a lure to first-time smokers.
For purposes of argument, let's say you buy into paternalism and the government's ability to do a good job with it (no need to reargue those points in the comments, they are only simplifying assumptions for the purpose of focusing on another question).
My question is: why impose quality restrictions when higher taxes would appear to be more efficient in limiting consumption and raising revenue at the same time? Revenue is especially scarce right now and making cigarettes less appealing lowers the revenue that can be raised by taxing them.
Can you derive the conditions under which such a quality restriction might be efficient nonetheless? I see a few cases:
1. More government revenue is a bad thing.
2. You have a funny model where a quantity restriction serves as a non-convex "notch" incentive and has a more powerful disincentive effect, yet with lower deadweight loss, than the smoother incentive embedded in the higher tax-enhanced price. (Heterogeneous consumer groups can contribute toward such a result but these are exactly the kind of theory papers which many people hate.)
3. The black market is a big problem. Quality regulations mean that good black market cigarettes must be made with illegal inputs and thus those inputs can be detected at the factory source and also remain detectable throughout the life of the cigarettes.
What else am I missing? Overall, given the initial premises, I still suspect that higher taxes are a better policy than quality restrictions.