Today, NTU sent a letter to the Illinois House, urging them to reject any proposal to hike the tax on cigarettes to close the budget gap. In relevant part, the letter read:
"While some see cigarettes as easy targets for taxation, the reality is that tobacco tax hikes are very burdensome to small businesses and the poor. Currently, Illinois has a cigarette tax rate that is below the national average. But if enacted, this tax increase would suddenly put Illinois convenience stores at a competitive disadvantage, as their cigarettes will cost more than those sold in all neighboring states except Wisconsin. The National Association of Convenience Stores reports that tobacco products account for 33 percent of total sales. Especially when Illinois’ unemployment rate stands at nearly 12 percent, a job-killing tax increase on small businesses makes no economic sense."
"This recessionary tax increase will impact far more than the small business community. Since the poor are more likely to smoke, Illinois’ low-income families, especially those who live in Chicago’s South Side and the rural Downstate region, will disproportionately feel the pinch of this tax. With a federal cigarette tax increase already having taken effect, boosting the state rate would amount to a one-two punch aimed at Illinois’ worst-off citizens. Furthermore, as the combined federal-state cigarette levy climbs and consumption decreases, Illinois will be faced with a dwindling pot of revenues. This is what happened following enactments of cigarette tax hikes in New Jersey and the District of Columbia, which reported collection shortfalls of $52 million and $7 million, respectively. That’s all the more reason why policymakers should instead focus on spending restraint and tax reform to restore the state’s fiscal condition to health over the long term."
Let's hope the Illinois House sees the shortsightedness of a cigarette tax hike and looks for ways to find savings in government spending.