High Cigarette Taxes Backfire Once Again: Illinois Latest State to Collide with Reality– Once again, cigarette taxes fail, but that won’t stop regressives from proposing them!
Who would have thought that higher cigarette taxes would reduce tax revenue? Well, anyone with a brain would have predictecd that, so I guess that’s why regressives went and did it anyway. Hot Air has the details…
With some time having passed to let the cash cow fatten, we should check back in and see what the fine citizens of the Land of Lincoln are doing with their new found largesse. I do hope they’re not all getting fat and lazy now that all of the state’s fiscal problems have been solved. Ahhh… happy days.
When Illinois Gov. Pat Quinn signed a bill adding another dollar a pack to the state’s cigarette tax, law enforcement leaders knew they had their hands full.
John Chambers, head investigator for the Illinois Department of Revenue, says cigarette smuggling now rivals illegal drug smuggling, and street gangs are getting involved.
“Keep in mind this is very similar to drug activity, smuggling drugs, and there could be concealed compartments, false floors in the bed of a truck, much like drugs, all packed with cigarettes,” Chambers said.
In Cook County, the tax on smokes is now $4.66 a pack. In Indiana it’s $0.995. Missouri checks in at $0.17. Who could possibly have seen this coming?
In a recent study, University of Illinois at Chicago professor David Merriman found 75 percent of cigarettes in Chicago didn’t have the proper tax stamps. He says the most recent increase will likely have a big impact along state lines.
“For the ordinary everyday smoker, many of them have already found ways to avoid the tax. I think it’s going to be a much bigger issue in areas where the state border makes it a big difference,” Merriman said.
A clerk at a tobacco shop in Hammond, Ind., less than a mile from the state line, says business has doubled since the latest increase began at the end of June.
How many times does this have to happen before the regressives see that it doesn’t work? This humble blogger has been covering this type of thing since 2009. Like this…
Native Americans are exempt from cig taxes. Guess what? People go to them and buy their smokes! That seems simple enough, but as usual, there is more here.
The tax hike, the first in six years, is expected to earn the state between $200 million and $300 million. A pack of premium cigarettes in New York City now costs $7 or $8; prices would rise to above $9. Opponents of the tax increase argue that higher prices would drive smokers to seek ways to evade the law and purchase cheaper cigarettes from smugglers or in neighboring states, blunting potential revenue gains for the state. “It’s a black market gold mine,” a senior fellow at the Manhattan Institute, E.J. McMahon, said of the proposed tax. “You have to invest resources in scores of attorneys, cops, and auditors, who are all part of the tax enforcement you need.”
“By raising cigarette taxes you help fund the mob,” the president of Americans for Tax Reform, Grover Norquist, said. “Cigarettes are easier than liquor, as they’re lighter and smaller per container. It leads to smuggling and smuggling is done best by organized crime.”
And there’s even more…
Mr. Norquist said New York’s proximity to states with lower taxes would lead smokers to cross the border to buy cigarettes, reducing tax revenue below state projections.
New York has seen significant increases in its cigarette tax rates before. In 2002, New York City’s cigarette tax increased to $1.50 from $0.08, as part of an initiative by Mayor Bloomberg to encourage smokers to give up the habit. Although the taxes produced an increase in city and state revenue, some smokers took illegal measures to avoid paying the new tax, costing taxpayers tens of millions of dollars.
A 2007 report by the Independent Budget Office, a nonpartisan city agency that analyzes the city’s finances, found that 27% of city smokers and 34% of upstate smokers sometimes bought “under-taxed” cigarettes in 2006. These smokers avoided the tax by buying cigarettes from other states, ordering cigarettes over the Internet, and purchasing cigarettes at Indian reservations. The city lost an estimated $40 million in tax revenue as a result of cigarette tax evasion in 2006, according to the report.
“It encourages people not to be ripped off,” the founder of Citizens Lobbying Against Smoker Harassment, Audrey Silk, said of cigarette taxes. “Any consumer who’s so abused will look for ways to avoid it, making outlaws out of normally law-abiding citizens.”
According to Patrick Gleason, director of state affairs for the conservative Americans for Tax Reform, tobacco has not been the revenue boon states that have increased cigarette taxes had hoped.
“The lack of interest in raising tobacco taxes this year can be attributed to the fact that tobacco taxes have indisputably proven to be a dubious and declining source of revenue,” Gleason told TheDC. “From 2003-2007, 16 of 59 tobacco tax hikes fell short of revenue projections.”
Here in Washington D.C., for example, the city’s 2009 $0.50 tax hike resulted in a severe drop in expected revenue. In 2010, the District of Columbia’s chief financial officer Natwar Gandhi reported to the mayor that the projected government intake was over $15 million below what they had initially estimated.
Gleason pointed out that for revenue, cigarette taxes are proving to be a loser.
“New Jersey raised its cigarette tax by 17.5 cents in 2007, yielding $52 million less than Garden State lawmakers anticipated and $22 million less than was generated prior to that tax hike,” Gleason told TheDC. “Over the past decade it has become clear that tobacco taxes are an unreliable source of revenue and one in which no budget should depend on.”
The Empire State is struggling to bring in additional tax revenue it projected it would gain from efforts to stop smokers from buying untaxed cigarettes on Indian Reservations, reports the New York Post:
The state’s tax collectors were recently calling around to convenience-store owners, wondering what was up. The $130 million in extra tax that Albany was expecting from a change in the law about cigarette sales on Indian reservations wasn’t happening.
A memo sent to members of the New York Association of Convenience Stores from the group’s president, Jim Calvin — a copy of which I have on my desk — said, “I got a call from Gov. Cuomo’s budget office yesterday. In examining cigarette tax receipts so far this fiscal year (April 1 to March 31) it looks like they will fall considerably short of their projection in new revenues. . . .”
The state had hoped to get the extra dough by enforcing a new law that made it illegal for licensed cigarette wholesalers in the state to sell untaxed name-brand cigarettes like Newport and Marlboro to Indian reservations.
Seriously, how many more times does this have to happen before the regressives get it? They say that the definition of insanity is doing the same thing again and again, and expecting a different result. Apparently, regressives are the craziest folks on Earth, as they are the energizer bunnies of taxation. Unfortunately, they are continuing to raise taxes of all sorts, and it’s only going to hurt people, or turn them into criminals.
When regressive propose and implement a policy, and it fails, not only is someone else to blame, the solution to the failure is to do more if it!