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* John Patterson has an excellent story on the cigarette tax today. As you already know, the bill passed a Senate committee yesterday…
There’s a cycle that’s developed with state cigarette tax policy. The state raises the tax, rakes in the added millions, watches it begin to drop off after a couple years and then pushes another tax increase.
This cycle has played out at least three times since the early 1990s.
The last state cigarette tax increase was 40 cents per pack, approved in 2002. It increased the state’s tax take by 33 percent. But by 2005, cigarette tax revenue plunged 14 percent, followed by a 2.7 percent drop in the 2006 budget year.
The result? The latest push for a cigarette tax increase, this time on the heels of a statewide ban on smoking in public places such as restaurants and bars.
Critics said the volatility shows why the tax is a bad idea. Supporters said it’s still better than raising other taxes.
* I’m probably quoting too much, but I just had to add this tidbit from Patterson’s piece…
However, later that same year [2002], Blagojevich’s campaign waylaid Republican nominee Jim Ryan when Ryan suggested he’d consider raising sin taxes to balance the budget if elected.
“Name a kind of tax (increase), Rod is opposed to it,” Blagojevich’s campaign spokesman told the Daily Herald in October 2002.
* Meanwhile…
Senate President Emil Jones, D-Chicago, has previously opposed cigarette tax hikes, including in 2005 when Gov. Rod Blagojevich proposed an identical increase.
“President Jones is behind it,” said Sen. Terry Link, D-Waukegan, a member of Jones’ leadership team. “He wants it moved, and he wants it passed.”
Asked why Jones has had a change of heart, Link said, “It’s July 25th, and there’s a lot of change of hearts around here.”
* Meanwhile…
The Illinois Department of Revenue said it supports the proposed cigarette tax, straying away from the governor’s campaign pledge not to sign any legislation that would increase sales tax. “This is different than the sales tax,” said Larry Doll, spokesman for the department. “It’s an excise item. It’s different than a general sales tax. A sales tax is applied to all items included necessities. People need food, clothing, what have you, whereas I don’t think you can make the same argument for cigarettes.” Doll also said it’s his understanding that the governor would sign the legislation if it wins approval.
* More stories, compiled by Paul…
* State Senators fight for new cigarette tax hike
* Lawmakers consider tax hike on cigarettes
* Senate committee votes to raise cig tax by 75 cents
* Budget put on the packs of smokers
* Illinois Senate committee OKs cigarette tax
posted by Rich Miller
Thursday, Jul 26, 07 @ 9:17 am
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In 2005 New Jersey hiked cigarette taxes only to lose $22 million in revenue the following year. You eventually reach a point where there are no more elasticities.
Using a declining revenue source to pay for programs in which prices are rising should be a no brainer. Tells us a lot, doesn’t it.
Comment by Greg Thursday, Jul 26, 07 @ 9:36 am
Legislators are getting desperate to raise revenue, considering that Blagojevich is being completely unreasonable about implementation of a progressive income tax.
Comment by Squideshi Thursday, Jul 26, 07 @ 9:39 am
Why not also raise the tax on soft drinks, potato chips, pet food, hair-care products, makeup, televisions, CD’s, lawn mowers, etc. Aren’t these excise items too?
Comment by Jechislo Thursday, Jul 26, 07 @ 9:51 am
Man, maybe I should quit my job and start a cigarette smuggling business. I just need to go to Chicago bars and sell ‘em at $5 a pack. I’ll make a fortune.
Squid - last I checked, the State Constitution prohibits progressive income taxation. We’re a flat tax wonderland.
Comment by Jerry Thursday, Jul 26, 07 @ 10:02 am
Yesterday I actually saw a guy selling cigarette packs at $4 a pack in my CTA train. I think we are already seeing smuggled cigarettes. Jerry will have to lower his price.
Comment by Oakparker Thursday, Jul 26, 07 @ 10:31 am
All this hot air over doing all these great things for Illinoians. All this bloviating over growing government so that you can get everything you want without costs, thanks to government.
But when it comes to asking voters to pay for it, these liars turn tail.
Some believers. Some leadership!
The Illinois Democratic Party is becoming a victim of it’s own stupidity. It promises and promises free lunches, then after getting elected, tries to figure out how to really deliver those lunches for free. They discover reality and start searching for golden geese to slay.
What they never admit to voters is that their promises are unworkable and they know it. Instead they search for scapegoats, loopholes, pensions and vices to rob from. Everytime they kill another golden goose, they know that they push us closer to bankrupsy - but they are hooked on their own lies.
Its madness. The golden goose that was cigarette taxes will die this year. The Democrats know this, but they don’t want to think about it. Like their governor, the Democrats are praying for some kind of economic miracle to raise this state’s finances to fix the disasters they knowingly create.
You cannot expect a political party that has no business skills to run an organization as large as a state government without destroying it. You cannot expect a political party that hates profits, wealthy people, and successful capitalists to understand economics enough to make good decisions for a state or country.
The Democratic Party is full of lawyers, activists, enviromentalists, and well-meaning people with no clue on how to operate a government within the limits of a society’s ability or needs.
We are broke as a state, and stupid to keep these people in control.
Comment by VanillaMan Thursday, Jul 26, 07 @ 10:51 am