Illinois Lawmakers Eye Cigarette Tax

NEW YORK -- Cigarettes continue to attract legislators seeking ways to boost tax revenues. Witness the 62-cent increase in the federal excise tax that went into effect April 1, 2009, raising the federal levy to $1.01 per pack -- the biggest federal hike to date.

But the federal government isn't alone in this endeavor. As of last month, the Illinois Senate, passed an increase in the state's cigarette tax, doubling it from 98 cents a pack to $1.98. That is expected to bring in $300 million for the state -- which is facing a $11.5 billion deficit -- but, says Governor Quinn, the new tax revenue is aimed partly at restoring the $200 million in state-funded college scholarships that were eliminated last spring.

However, it's no sure bet the expected funds will be raised.

Bill Fleichli, executive vice president of the Illinois Petroleum Marketers Association/Illinois Association of Convenience Stores (IPMA/IACS), pointed out, "According to an Illinois State University study, the last five times the state increased cigarette taxes, revenue actually dropped in the second subsequent year. And with this huge $1 tax hike over the next two years, cigarettes will also be cheaper in adjoining states, so local smokers will forsake Illinois convenience stores for out-of-state merchants. That lowers income for our merchants, threatens employment and ultimately brings in fewer taxes for the state."

Fleichli also refutes another reason given for the tax: youth smoking will be prevented. "According to federal data," he noted, "Illinois already has one of the lowest youth smoking rates in the nation -- 5.3 percent. So the only thing that increased taxes will do is hurt Illinois' merchants. The IPCA/IACS will be actively opposing the bill to keep it from passing in the House."

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