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A Tax Hike Is Not A Spending Cut


Posted by Will Upton on Tuesday, April 24th, 2012, 4:23 PM PERMALINK


The Illinois Policy Institute has produced some excellent analysis of Governor Pat Quinn’s budget gimmick and the Illinois House budget resolution containing a massive $350 million tobacco tax hike, noting: “A tax hike is not a spending cut.” 

Below is the Illinois Policy Institute’s open letter to the Illinois General Assembly opposing the tobacco tax increase:

Dear Legislator:

Both Gov. Quinn’s budget proposal and the House budget resolution called for a $2.7 billion reduction in Medicaid liabilities. Similarly, the governor and the General Assembly have committed to reducing the tax burden for working families.

Yet Gov. Quinn’s recently released Medicaid plan does not meet either goal. The governor identified only $2 billion in Medicaid spending reductions, the bulk of which is steep provider cuts. Unbelievably, he then called for additional tax hikes to raise $700 million in new revenue ($350 million from a tobacco tax hike and a $350 million federal “match” to be added to the national debt). This is without a doubt a tax hike on Illinois’ working class – the average smoker’s household income is under $36,000 a year.

A tax hike is not a reduction in accrued obligations. It is not reform. It is more taxing and more spending, plain and simple.

Members of the General Assembly who reject the harmful “tax and spend” habits of the past have good reason to reject this plan. Falling short on spending reforms while hiking taxes on Illinois’ poor and disadvantaged is not a winning combination.

A budget framework that rests upon this toxic combination should be put aside in favor of a plan that finally treats taxpayers with the respect they deserve.

Sincerely,

Kristina Rasmussen
Executive Vice President

In addition to their open letter, the Illinois Policy Institute released two pages of analysis on the proposed tobacco tax increase:

In February, Gov. Quinn told lawmakers that in order to rescue Illinois’ Medicaid program, the state would need to “reduce expenditures in the program by $2.7 billion” for fiscal year 2013. But the plan he released in April does not reduce expenditures by $2.7 billion as promised.

Instead, his proposal reduces Medicaid spending by only $2 billion, the bulk of which comes from cuts to reimbursement rates for doctors and hospitals who serve Medicaid patients. In order to fill the gap between his plan and his target, he proposed hiking taxes on cigarettes to raise nearly $700 million in new revenues. Worse yet, these taxes are aimed primarily at the lower and working classes, with the average smoker’s household income falling below $36,000 per year.

The full report can be read here.

Click here to find your Illinois legislator and tell them that tax hikes are not spending cuts and to oppose any increase in the state’s tobacco taxes.    

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