Illinois Senate President John Cullerton wants to raise cigarette taxes. Again. This is two months after billions of dollars in personal and corporate income tax increases (a cigarette tax hike almost made it through as well, though it was ultimately removed from the package). And it comes after two years of failed attempts to raise the cigarette tax, which lost support due to its impact on border retailers and the poor.
Cullerton ostensibly wants to use the new revenue generated by the tax for a massive multi-billion dollar statewide construction project:
Sen. President John Cullerton, D-Chicago, proposed the measure as a way to fund the state's massive $31 billion capital project, and Clayborne is not yet sure if he agrees with Senate leadership.
I'm skeptical of his motive (this is a tax increase Cullerton has wanted for a long time), but even so, there are few funding mechanisms for a massive capital project than cigarette taxes. They represent a perpetually declining source of revenue, even moreso after a 102 percent tax increase. To tie an enduring spending program to an unstable revenue source is just silly. But then again, this is Illinois.
To see ATR's letter in opposition to Cullerton's tax increase, see below.
March 16, 2011
Here we go again. I write today for what seems like the hundredth time in opposition to John Cullerton’s cigarette tax increase. Every year a cigarette tax increase is introduced in Illinois, and every year it is recognized as a regressive tax increase on small businesses and voted down. This year should be no different. I urge you to vote no on Sen. Cullerton’s cigarette tax increase.
It seems like just yesterday that you slammed Illinois with billions of dollars in tax increases at the behest of Gov. Quinn. I suppose that’s because it practically was. Now Sen. Cullerton is back for yet another bite at the apple. Why is there no discussion of serious spending restraint? Why is the tax hike reflex so strong and so sudden in Illinois?
And raising the tobacco tax is a particularly harmful idea, especially when attempting to close a budget gap. Because tobacco is a declining source of tax revenue (even more so after artificially increasing its price), it rarely raises the amount of money projected. New Jersey and Washington, D.C. notably saw a net decline in revenue after cigarette tax increases in recent years. And with Illinois’ unemployment rate at 11.5 percent, now is certainly not the time to raise taxes on retailers, for whom tobacco represents nearly one-third of sales nationwide.
I am keeping this short because there is not much left to be said. At ATR we believe there are better solutions to budget problems than painful tax increases. And we do not believe in attempting to fund enduring spending programs with declining revenue sources. Because Sen. Cullerton’s proposal runs afoul of both of those principles, I urge you to vote NO.
For more information on this issue or on the broader issue of tax and budget policy, please contact ATR state affairs manager Joshua Culling at email@example.com.