Cook County cigarette tax hike takes effect today

Health nuts and anti-tobacco fanatics, get out your streamers and champagne: Cook County’s new $1 per pack cigarette tax hike goes into effect today. Contrary to the so-called health conscious intentions of this tax’s creators, however, Cook County smokers will continue to buy cigarettes. Lots of them. Last year, Cook County brought in approximately $115 million...

Health nuts and anti-tobacco fanatics, get out your streamers and champagne: Cook County’s new $1 per pack cigarette tax hike goes into effect today.

Contrary to the so-called health conscious intentions of this tax’s creators, however, Cook County smokers will continue to buy cigarettes. Lots of them. Last year, Cook County brought in approximately $115 million in cigarette tax revenue in fiscal year 2012. Cook County Board President Toni Preckwinkle spearheaded the cracker-jack plan to fill Cook County’s fiscal year 2013 budget shortfall of $267.5 million with a combination of tax hikes that include the cigarette tax, among others. The only problem is that none of these hikes bring in enough money to plug the hole. The cigarette tax hike was only projected to bring in $25 million in new revenue.

The number of people smoking in the county likely won’t go down – but the number of packs sold in the county may drop significantly. The Chicago Tribune reported that when the county hiked the cigarette tax by $1 per pack in 2006, cigarette tax revenue initially rose by $46.5 million, reaching $203.7 million according to county records. But then in 2009 the total cigarette tax revenue fell significantly, bringing in only $163 million – $20.4 million less than the county collected in 2005. As mentioned earlier in this post, cigarette tax revenue for 2012 was just $115 million. And Preckwinkle and the rest of the Cook County Board have projected such a pattern, with estimated cigarette tax revenue from the $1 increase dropping all the way down to $9 million in 2017, much lower than the original projection of $25 million in new revenue for 2013.

But how could this plan have been proposed as a way to fill a budget hole if its backers knew it would never produce the necessary revenue? Somehow, Preckwinkle says she is OK with this, because she associates decreased cigarette tax revenue with fewer smokers in the county, which will lead to a healthier community with less need for expensive treatments at public hospitals.

But let’s get serious – people won’t quit smoking, they’ll just find other ways to get their fix. The combination of Cook County, Chicago and Illinois taxes on cigarettes totals $5.66 per pack. That’s the second-highest cigarette tax in the nation, trailing only New York City’s $5.85 per pack. This is on top of the $1.01 federal tax on each pack of cigarettes.

In contrast, consumers in Missouri pay the lowest cigarette tax in the nation at $0.17 per pack. Indiana’s rate is a low $0.995 per pack.

Given this disparity, it’s likely business will be booming for out-of-state vendors and smugglers.

A recent study done by University of Illinois Chicago professor David Merriman found that 75 percent of cigarettes in Chicago didn’t have local tax stamps on the packs.

That’s probably not music to Toni Preckwinkle’s ears, since she was the mastermind behind this great revenue boon, though she’s already vowing to crack down on stores selling contraband tobacco.

While this plan will fail to fill budget shortfalls and curb Cook County’s smoking habit, here’s what the tax hike is more likely to succeed in:

• Increased smuggling and criminal behavior. A study by the nonpartisan Mackinac Center for Public Policy found that a $1 per-pack tax hike on cigarettes would lead to more criminal behavior and cigarette smuggling. In fact, the study estimates that tobacco smuggled into the state would account for 26.3 percent of total cigarette consumption (compared with only 5.9 percent before the tax hike).

• Hitting low-income earners the hardest. According to the Heartland Institute, “Not only are lower-income earners more likely to smoke, they also smoke more frequently. They bear more of the tax burden than higher-income earners, in absolute terms and as a percentage of income.”

So hats off to Preckwinkle and the rest of the gang on the Cook County Board for a job well done. Now the county’s half-full coffers will be home to revenue earned on the backs of the county’s low-income residents. And while Cook County’s finances will continue to suffer, the cigarette smuggling industry is likely to see a big boost.