Buck a pack tax by the numbers
Wednesday, Jul 18, 2007 - Posted by Rich Miller
* The State Journal-Register has an editorial today that lists the benefits of a dollar a pack increase in the state’s cigarette tax. The numbers were provided by the American Lung Association…
* Cigarette pack sale decline in Illinois — 123.3 million.
* Number of current adult smokers in Illinois who would quit — 57,700.
* Increase in total number of kids alive today who will not become smokers — 130,800.
* Long-term health-care savings in Illinois from adult and youth smoking declines — $2.8 billion.
* The paper adds…
Illinois with its current 98-cents-per-pack tax raised about $634 million last year. That’s a significant revenue source, akin to the amount raised by the state lottery. A $1-per-pack increase is estimated to bring in about $412 million more annually. […]
While we sincerely doubt a $1-per-pack tax increase will gain the needed support, if legislators become serious about any significant increase in the cigarette tax, they should demand that some of the money raised be used to underwrite cessation efforts on the part of smokers. Yes, it might cut into the state’s take in the short run, but in the long run it makes both fiscal and moral sense.
* But Joe Calomino of Americans for Prosperity, Illinois, posted these numbers in comments yesterday…
The Effect of a $1/pack Cigarette Tax Hike on Illinois Retailers
* Tobacco Sales are Important to Illinois Retailers – Illinois stores sold 657 million packs of cigarettes in FY 2006, with a gross retail value of nearly $3.2 billion. Illinois merchants earned nearly $560 million in gross profits on these sales.
* Tobacco Sales Support Illinois Jobs - It is estimated that nearly 8,000 Illinois retailer and wholesaler jobs were supported by in-state tobacco sales (based on estimated gross profits). […]
* In spite of large recent tax increases of the Illinois, Cook County, and Chicago cigarette taxes, some are proposing an Illinois cigarette tax hike of $1/pack. This would raise the Illinois state tax to $1.98 per pack. Illinois residents outside of Cook County could save $18.10/carton in Missouri, $16.80 in Kentucky and $9.85 in Indiana. In Chicago the total state and local cigarette tax would be $4.66/pack. A Chicago resident could save over $44.90/carton in Missouri or over $36/carton in Indiana. A van-load of cigarettes from Missouri would have a profit potential of nearly $255,000. Such bootlegger incentives could create a situation reminiscent of the days of Al Capone.
* Loss in Cigarette Sales Volume – Cigarette volume is estimated to fall by nearly 25% on an annualized basis or by 164 million packs due to the proposed $1 tax hike in FY 2008.
* Loss in Sundry Product Sales - Sundry product sales, or products normally bought in conjunction with tobacco products, could fall by nearly $140 million due to the $1 tax hike.
* Loss in Illinois Gross Profits (value added) - Gross profits lost to Illinois retailers and wholesalers are estimated at approximately $116 million due the proposed $1 tax hike.
* Convenience Store Losses - Cigarette sales at C-stores would fall by 100 million packs due to the $1 tax hike. Gross profit losses could average about $15,000 per store
* Revenue Impact - It is estimated that Illinois will gain about $320 million from the $1 tax hike. […]
Taxes Per Pack In Chicago After a $1 IL Tax Hike and 61 cent Federal Tax Hike
Federal Tax/ Pack $1
State Tax/Pack $1.98
Cook County Tax/Pack $2.00
Chicago Tax/Pack .68
State, County, Local Sales Tax .77
Grand Total $6.43
Go here to read more. Joe said he’s working up a post for his Website and it will be up soon.
Thoughts?
- WhoSaidThat - Wednesday, Jul 18, 07 @ 10:09 am:
I have never trusted numbers sited in news articles because I have always felt that they never tell the whole story. This appears to be a perfect example.
- keepmeoutofIL - Wednesday, Jul 18, 07 @ 10:15 am:
So Joe’s argument against the tax hike is all of the number of jobs lost? While I think it’s always important to compare the long-term effects of a law versus the short-term effects on the people it seems incredibly callous to compare job numbers to number of lives potentially saved. The Al Capone argument is false also because most people are not going to start searching for the man on the corner with the out-of-state cigarettes. It’s just like gas prices - people pay it because they are addicted to driving their cars everywhere. The reality is that cigarette smoking does contribute to the state’s health costs so smokers should contribute more money to health care in the state.
Now do I believe IL has any possibility of actually putting the money toward health care like they are proposing? Maybe some of it, but not as much as they are saying.
- FED UP - Wednesday, Jul 18, 07 @ 10:29 am:
Add a nickle to the tax to raise a little more money while not chasing all the mokers across state lines
- Skeeter - Wednesday, Jul 18, 07 @ 10:38 am:
The numbers are nice, but incomplete.
What about the impact of the health care required for the smokers? If uninsured smokers are having heart attacks and suffering lung cancer on the Medicare/Medicaid, it effectively raises all of our taxes.
The proposed bill simply shifts the burden to those using the services.
- Justice - Wednesday, Jul 18, 07 @ 10:40 am:
These numbers are all impressive but the real problem, as I see it, is that we continue to look for ways to raise more money to spend when we haven’t done a thorough analysis of the many, many programs that have been in place for years. Many have most likely outlived their usefulness, are duplicated in one form or another, and have huge overhead administering them. It’s as simple as “tax and spend” with no end in sight. It is admirable that the governor wants to do so much for so many with so little. But we need to first focus on the ape in the room and get spending under control and pay our existing bills. The cigarette tax is simply a tax that distracts us from what we should be discussing…fiscal responsibility.
- one of the 35 - Wednesday, Jul 18, 07 @ 10:44 am:
Rich: If a merchant is operating a business and expects to increase tobacco sales in light of the medical knowledge that has been assembled, then I think the merchant is not being realistic. Our Country is doing everything possible to discourage smoking. The handwriting is on the wall. The tobacco industry is dying. Everyone should understand this. We should all make appropriate economic plans to acknowledge this fact.
- Captain America - Wednesday, Jul 18, 07 @ 10:45 am:
Joe’s just doing his job. I certainly have nothing against Illinois retailers. But I suggest that everyone should see the movie, Thank You for Smoking, to get a healthy, hilarious, and entertaining perspective about this issue.
I think the other states should tax cigarettes as highly as we do. Smoking is a really terriible addiction, and exorbitant taxes seem to be a sound long-range strategy to reduce the number of nicotine addicts.
- VanillaMan - Wednesday, Jul 18, 07 @ 10:50 am:
Even though we clearly see that raising the tobacco tax as proposed would not be an improvement, a number of the bloggers here so desperately want to find a funding source for their health care solution, they are unwilling to admit these figures are worrisome.
You have to wonder what it would take to get these people to start seeing the light.
The goose that lays the golden eggs is dead.
Lets stop pretending we can just vote free health care for ourselves, OK?
- grand old partisan - Wednesday, Jul 18, 07 @ 10:51 am:
This is what has always bothered me about the Lung Association. Their support of increased taxes in order to discourage smoking is short sighted and counter-productive. While some smokers will probably quit as a result of the increased cost, the state will become even more financially reliant on the revenue generated by the continued smoking of the rest (this is even more problematic when you consider that the money is to be used to make a permanent entitlement program fiscally solvent). This puts the government in the position of being unable to ever completely ban tobacco use (which, I would assume, is the Lung Associations ultimate goal).
- Jechislo - Wednesday, Jul 18, 07 @ 11:42 am:
Why, according to these figures it would almost be cheaper to smoke “illegal drugs”.
- Anonymous - Wednesday, Jul 18, 07 @ 11:55 am:
Passing increased tobacco tax, only means the state is more dependent on the bad habits of the state citizens, but don’t call this a measure to decrease smoking in Illinois. If we are serious about stopping smoking, then - Just outlaw the sale of tobacco products in the state of Illinois. No wait a minute What would the state do without all that revenue from tobacco sales to fund all of our social goodies.
Best thing to do is to approach a smoker and thank him for contributing to the state coffers.
- Budget Watcher - Wednesday, Jul 18, 07 @ 12:16 pm:
Joe should also point out that the other taxing entities, especially Cook County, will see a decline in their revenue base. That’s significant to a county that already has severe budget issues.
- Fake Bill - Wednesday, Jul 18, 07 @ 12:25 pm:
- Justice - Wednesday, Jul 18, 07 @ 10:40 am:
Hit the nail on the head. I know of one program that costs the State 3.7 million dollars. The people being served… reside in a different State. Once a program is started it’s almost impossible to cancel it, needed or not.
- c-rock - Wednesday, Jul 18, 07 @ 1:15 pm:
We need to tax politicans.
- Squideshi - Wednesday, Jul 18, 07 @ 1:58 pm:
I think that addicts’ time would be better spend trying to get off the tobacco than complaining about the taxes that they choose to pay by buying. It’s not like cigarettes are a necessity–they’re an addictive, harmful drug that damages public health and reduces the efficiency of our workforce.
- Crimefighter - Wednesday, Jul 18, 07 @ 3:05 pm:
Grand Old Partisan got it right…the problem with cigarette taxes is in order to collect the tax you have to have people smoke.
- steve schnorf - Wednesday, Jul 18, 07 @ 7:35 pm:
I don’t see anything wrong with a tax no one has to pay, be it tobacco, liquor, gambling, whatever.