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Oppose the Massive Income and Cigarette Tax Hikes!
An Open Letter to the Illinois General Assembly
January 10, 2011
On behalf of the National Taxpayers Union’s 14,000 members in Illinois, I urge you to reject Governor Quinn’s proposal to raise the income and cigarette tax rates. A multibillion-dollar tax hike on Illinoisans to finance more borrowing will do untold damage to the state’s fragile economy and will not solve the root of the state’s fiscal problem, which is massive overspending.
Governor Quinn’s proposal to raise the personal income tax by 75 percent and nearly double the corporate income tax will cost the state jobs when it can ill afford more unemployment. An Illinois Policy Institute study estimates that an income tax change alone will cost the state at least 217,000 jobs. To put the personal income tax hike in perspective, the Institute has calculated that a family with two kids earning $80,000 would pay $1,620 in higher taxes, on top of the $2,160 they’re already paying in state income taxes. Further, the corporate income tax hike will likely hasten the departure or hamper the expansion of Illinois businesses, compounding the economic problems of the state.
Additionally, raising the cigarette tax by $1 per pack – a 102 percent increase – will vault Illinois from having the 29th-highest to at least the 14th-highest state-level tax in the nation. Cigarette tax hikes are not good public policy because such taxes disproportionately burden the poor and are unreliable sources of revenue. The poor are more likely to smoke so they feel the burden of the tax more than others. As tax rates rise, people buy less or seek out cheaper alternatives from neighboring jurisdictions with lower tax rates. Moreover, projected collections from cigarette tax hikes are notoriously optimistic. Illinois cigarette tax revenues are currently down $41 million (or seven percent) since 2007. New Jersey reported a $52 million shortfall in revenues after it raised its cigarette tax by 17.5 cents. Despite boosting its cigarette tax by 50 cents last year, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenue collections following tobacco tax hikes.
Illinois faces a serious fiscal problem and needs to undertake equally serious reforms, especially reforms to its bloated state budget and burdensome tax code. It should not add to the complicated tax burden by raising billions in taxes to finance billions more in borrowing. Therefore, our members hope that you will reject Governor Quinn’s proposal to increase taxes.