Wednesday, July 18, 2007

Cigarette Tax Increase

The new proposal on how to add more revenues to the Illinois budget is to double the tax on cigarettes from 98 cents to a dollar and 98 cents. The cigarette tax increase is attractive to many State Senator and Representive that don’t want to raise taxes in general because one it only directly affects a small percentage of the Illinois population and target a product that most people dislike and that many moral oppose. It far easier to sell a “sin” tax to the general public than a general increase in the sales or income tax. While I don’t smoke, dislike the habit and could care less what the prices of cigarettes are, I still oppose the increase in the cigarette tax. The first reason is that it is a highly regressive tax; the poorer in society have a higher likely hood of being smoker and would ended paying a higher percentage of the tax than the percentage of the state income that they make up. Second if the increase in the tax is large enough it would serve to encourage people in the border area of the states to travel to near by state in order to purchase cigarettes, according to some estimates if the tax increase go throu consumer in downstate Illinois would be able to save around 20 dollars a carton by buying cigarettes out of state and consumer in Chicago could save around 30-40 dollars. The other side of this is will encourage the black market sales of cigarettes and the criminal eliminates that comes with black markets and smuggling. If the tax is high enough it will allow black marketers and even more criminal eliminate, such as gangs to make money by either stealing cigarettes or smuggling out of state cigarettes and then selling them, particular in Chicago/Cook County were prices are even higher. The third problem is that there are around 8,000 jobs in Illinois that depend directly or indirectly on the sales of cigarettes, if the tax increase leads to a decrease in the (legal) sale of cigarettes in the state, these jobs will be threaten and associate income and business tax revenue from them

The Final problem is that it makes a large part of state review, around a billion dollars subject to changes in the amount of cigarettes that are sold in the state and decline in sales of state cigarettes would reduce state revenues and increase in smoking, which I am sure most people would agree is a bad thing, would increase state revenue.

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