Illinois ‘sin taxes’ rely on an unreliable naughty list
State politicians like to pass laws they claim will make Illinoisans healthier by taxing their naughty habits. The taxes rarely are as lucrative as projected and hurt some more than others.
Illinoisans on the naughty list get higher taxes for Christmas – and every other day of the year.
That’s because the state’s so-called “sin taxes” put extra costs on purchases typically considered bad habits: liquor, cigarettes, cannabis and gambling.
The rhetoric around these taxes is almost always the same: state lawmakers claim raising the cost will discourage people from indulging. They never acknowledge the state becomes reliant on the extra revenue as residents struggle with their vices.
In 2023, Illinois budgeted $735 million for expected revenues from those four taxes. That’s a big budget gap to fill if Illinoisans were suddenly to kick their bad habits, as lawmakers claim to want.
The state’s most recent “sin tax” hike expanded gaming to include a Chicago casino and went into effect in July 2020. At the time, Gov. J.B. Pritzker’s press release claimed the tax would create jobs, fund the pandemic response, build critical infrastructure, and help fix the pension crisis and lower property taxes.
Public employee pension debt in Chicago alone topped $35 billion according to a report released this summer. The newest state pension debt report showed Illinois now has $142.3 billion in liabilities, up $2.6 billion in a single year.
Illinois only anticipated $157 million in gaming tax revenues for 2023, not nearly enough to deliver all that Pritzker promised. Plus, his messaging implies it would be good for Illinois if more people gambled.
The same goes for the state’s cannabis tax, which is high enough that it’s suspected to drive users away from regulated sources, undercutting state revenue estimates. Revenues also went down when Missouri legalized recreational marijuana at a much lower tax rate.
Another criticism of such taxes is they are regressive, meaning they tend to impact low-income residents disproportionately. A wealthy person with identical drinking and smoking habits to a poor person pays a smaller percentage of their income to the state for their addictions.
With some of the highest excise taxes in the country and a history of overstating the benefits of these sin taxes, you could say Illinois is addicted to addictions. Though residents may be incentivized to quit, the state is incentivized to continue.
If you’re thinking of giving up smoking, drinking or gambling as part of your New Year’s resolutions, there’s a chance Illinois would rather you picked something else.