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A look at the governor’s cigarette tax hike plan

Monday, Apr 23, 2012

* The Sun-Times editorialized on behalf of the cigarette tax hike to help patch the state’s huge Medicaid funding hole

First, a tax on cigarettes will deter smoking. The American Cancer Society estimates the tax increase would stop 72,700 children in Illinois from becoming smokers and encourage 53,400 adults to quit. That’s no small accomplishment, given how terrible smoking is for our health.

Second, smoking-related health-care costs drive up Medi­caid spending, a fact Gov. Quinn emphasized when he met with the Sun-Times editorial board Friday. Smoking is estimated to cost the state $4.10 billion a year in health-care costs — and $1.5 billion of that tab is picked up by Medicaid.

“This is a very big public health measure,” Quinn said, “and anyone who is involved in public health is all for this.”

Third, trying to balance the state’s Medicaid budget with cuts alone means walking away from federal dollars. No other tax offers that huge federal match.

Fourth, Quinn already is proposing 58 stunningly deep Medicaid cuts. Further cuts would be devastating.

Fifth, the last three Republican governors of Illinois backed cigarette tax increases five times.

One significant quibble: Any tax hike or revenue increase or budget cut elsewhere could be used to leverage federal Medicaid dollars.

* The Tribune also backs it

All of this is necessary, but doesn’t reach $2.7 billion. Enter the $1-a-pack cigarette tax, which would generate an estimated $337.5 million. Because Washington matches each state dollar spent on Medicaid, the state’s gain would double, to $675 million. We support this hike for two reasons: Medicaid, which provides care for smoking-induced illnesses, needs the money; the American Cancer Society estimates that tobacco cost Illinois $1.5 billion in Medicaid spending last year. And making cigarettes costlier means many people will quit or never start.

And

We hope Democrats, including those beholden to unions, will build on Quinn’s plan. Just as we hope Republicans will do the same — and drop their opposition to including a cigarette tax hike in any Medicaid rescue.

For Illinois to escape its downward spiral, its politicians of both parties will need to abandon some of their customary talking points (”No benefit reduction,” “No tax hike”).

We take it as a real measure of leadership that Gov. Quinn — accepting his “rendezvous with reality” — is pressing the case for major Medicaid and pension reforms. Friday afternoon, meeting with our editorial board, he said that legislative agreement to rescue Medicaid and pensions “will make Illinois a whole lot better state.”

He’s right.

* A Paul Simon Public Policy Institute’s 2011 poll of southern Illinoisans showed a large majority supported the cigarette tax hike

While Southern Illinois voters remain adamantly opposed to raising major taxes to plug the state’s $15 billion budget deficit, they show some support for increasing the cigarette tax, according to the latest Southern Illinois Poll conducted by the Paul Simon Public Policy Institute at Southern Illinois University Carbondale.

The poll, taken Feb. 14-22, showed 60.3 percent of registered voters in the state’s southernmost 18 counties favor a $1 per pack increase in the cigarette tax. There were 36 percent opposed. The rest were undecided.

* And a statewide poll taken in 2010, at the height of Tea Party intensity, found that almost three quarters of Illinoisans backed the tax increase

A poll released Thursday by the Illinois Coalition Against Tobacco found that voters statewide supported raising the cigarette tax by $1 – from 98 cents per pack to $1.98.

Of the 502 people who were surveyed, 74 percent supported the increase. That total included 71 percent of Republicans, 81 percent of Democrats and 68 percent of independents.

Even 42 percent of smokers said they support a cigarette tax increase, the survey found.

Supporters said the tax increase was the best way to fix the state’s $13 billion budget deficit. Other options, including higher income taxes, higher sales taxes and higher vehicle registration fees, were largely opposed.

Interestingly enough, the Campaign for Tobacco-Free Kids estimated back in 2010 that the buck a pack tax hike would bring in “nearly $300 million each year.” Gov. Quinn estimates that his buck a pack tax hike would bring in well over $300 million a year.

* But the two GOP legislative leaders are opposed

“We stand with our members on the Medicaid working group against any tax increases to solve our Medicaid crisis,” noted Senate Minority Leader Christine Radogno and House Minority Leader Tom Cross. “We are encouraging the working group to continue working in a bipartisan way to come up with $2.7 billion in Medicaid reforms and cuts, not revenue enhancements.”

* Former Senate President Pate Philip, a conservative, anti-tax Republican, usually supported cigarette tax hikes, believing the impact was felt mainly by Democratic voters, which may be why some Democratic legislators are opposed.

“I’ve always been again against cigarette taxes,” said state Sen. Gary Forby, D-Benton. “My district likes to smoke. When you do a tax on this, they go over in Kentucky, they go over in Indiana and they buy them cheaper. They just quit spending money in the state of Illinois.”

Illinois has a very long border with a whole lot of states, which is probably the most logical reason to oppose a cigarette tax hike.

* Roundup…

* Components of Medicaid savings plan still open to change

* Finke: Quinn threatens no break until Medicaid deal

* Our View: Illinois’ health care, pension quandary

* Smokers Upset About Proposed Cigarette Tax Hike

* Illinois Medicaid cuts worry healthcare providers

* Local reps not excited by Quinn’s Medicaid plans - Republicans Moffitt, LaHood say targeting fraud, abuse more important

* McCaleb: Positive steps on Medicaid, pensions?

* Cancer Society supports higher Ill. tax on cigarettes

* Despite questions, Quinn’s Medicaid proposal winning some praise

- Posted by Rich Miller        


14 Comments
  1. - wordslinger - Monday, Apr 23, 12 @ 9:53 am:

    –First, a tax on cigarettes will deter smoking. The American Cancer Society estimates the tax increase would stop 72,700 children in Illinois from becoming smokers and encourage 53,400 adults to quit. –

    If that’s the case, I think Quinn has an opportunity to get Illinois employers that offer health insurance behind this tax increase.

    A lot of employers are starting to offer incentives/disincentives to get their employees to stop smoking to keep their health insurance premiums down. This would seem to be a no-cost initiative they could get behind.

    Full disclosure, I’m a long-time smoker and have never tried quitting.

    But I’m also someone who thinks marijuana should be legalized and taxed heavily. Can’t be a hypocrite about cigarettes.

    It would force smokers to pay more of their fair share for the true costs of their health care. Gee, where have I heard a similar idea, before?


  2. - Oberver - Monday, Apr 23, 12 @ 9:57 am:

    I have read now that some studies are showing that since smokers live less longer they incurr less costs than non smokers overall on medicaid. I wish I knew how to verify this independantly. However I have a different suggestion. I have seen some pretty obese individuals using the link card to buy food. Perhaps by somehow cutting back on the types or quantities of foods the obeity rate could be cut similarly cutting medicaid health care costs.


  3. - Colossus - Monday, Apr 23, 12 @ 9:57 am:

    100% agree with Wordslinger, as per usual.

    While it does seem that employers could get behind this idea, it would also make sense that employers could get behind a plan that would allow them to stop paying for their employee’s health insurance while still supplying them with a healthy workforce. Hmm…if only there were a plan like that, or maybe even a law…

    Businesses commenting on, supporting, writing and opposing laws rarely make sense to me these days.


  4. - Shore - Monday, Apr 23, 12 @ 10:10 am:

    I am in strong support even as a republican for tax increases on booze and cigarettes so this is fine with me.


  5. - John Bambenek - Monday, Apr 23, 12 @ 10:11 am:

    Wordslinger-

    You assume cig taxes will actually go to pay for the person’s increase Medicaid costs… which was also the assumption with the Railsplitter settlement money.

    It would be one thing to match health care premiums to actuarial risk… that might be economically defensible.

    That said, there are fewer and fewer smokers every year, which means tying a long-term non-discretionary program (Medicaid) to a consistently declining revenue source means we’ve overtly adopted unsustainable funding and will have to just go back and either introduce more cutes or add more revenue to make up the difference.


  6. - langhorne - Monday, Apr 23, 12 @ 10:51 am:

    doesnt anyone see the folly of increasing a consumption tax with the intent to reduce consumption, in order to fund programs whose costs we cant cover because they are rising so fast?

    the tax was increased from 58 cents per pack to 98 cents july 1,2002, about a 69% increase. but revenue increased only 33% in fy 03. revenue went up another 19% in fy 04, and has declined each year since.

    state cig revenue was $561 mil in fy 11 and quinn says a 100% increase in the tax will increase revenue $337 mil–60%!! the example of the last increase shows the estimate should be half that amount, or less.

    cigs are the only bootlegged product where the quality stays exactly the same. your rolex knockoff is crap, but the marlboros from another state are exactly the same.


  7. - Cheryl44 - Monday, Apr 23, 12 @ 11:06 am:

    As a former long time smoker, I think raising the tax is a good idea. I don’t think it will pay for what it’s supposed to, but anything that will help other people quit is a good idea.


  8. - haverford - Monday, Apr 23, 12 @ 12:01 pm:

    “cigs are the only bootlegged product where
    the quality stays exactly the same. your rolex
    knockoff is crap, but the marlboros from
    another state are exactly the same.”

    And thus the first Indiana jewelers’ libel lawsuit was born.


  9. - Robert - Monday, Apr 23, 12 @ 12:23 pm:

    ==doesnt anyone see the folly of increasing a consumption tax with the intent to reduce consumption, in order to fund programs whose costs we cant cover because they are rising so fast?==
    I see the folly and agree with your point. However, the alternative is even deeper cuts to Medicaid children and families, and the total amount of proposed cuts to Medicaid is already the largest part of the solution proposed.


  10. - wishbone - Monday, Apr 23, 12 @ 2:17 pm:

    Smoking is now mostly a class issue. Sorry, but it is a major indicator of your social class. Increasing a regressive tax on addicted members of that class to help pay for medical care to that same class seems unfair, but screw them. Unlike a lot of their problems this one is purely self inflicted.


  11. - wordslinger - Monday, Apr 23, 12 @ 4:59 pm:

    –Smoking is now mostly a class issue. Sorry, but it is a major indicator of your social class.–

    What class is that? And what are the classes here in the SOI and USA?

    I’m a smoker and a pretty classy guy, myself.


  12. - wishbone - Monday, Apr 23, 12 @ 6:28 pm:

    Wordslinger: You may not believe there are social classes in this country but, of course, they exist. Check out the percent of smokers by education level which is a primary indicator of social class. See
    http://www.cdc.gov/vitalsigns/AdultSmoking/index.html


  13. - BillA518 - Tuesday, Apr 24, 12 @ 8:46 am:

    This is such a bad idea for two reasons -
    1. The huge influx of cash will be spent on new projects that will become ‘essential’ in a couple of years…just about the time the revenue dries up due to decreased sales. (but isn’t that what they want?)
    2. Just like the multi-billion dollar tobacco settlement of years back, the claims are based on junk science and cherry-picked statistics. “the American Cancer Society estimates that tobacco cost Illinois $1.5 billion in Medicaid spending last year.” That’s true. What they don’t want you to know is that tobacco SAVED Medicare over $2 billion because people who have been paying into Medicare (and Social Security) for decades, died from tobacco-related illness before they were old enough to draw ANY benefits.


  14. - Rich Miller - Tuesday, Apr 24, 12 @ 9:02 am:

    ===The huge influx of cash will be spent on new projects ===

    Sez who?


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