For cigarette smokers, tobacco tax increases often prove to be the ultimate patch.
If call volumes to stop-smoking lines are any indicator, upticks in cigarette taxes and bans on lighting up in public often succeed where nicotine gum and self-help tapes fall short. And lean economic times make for a double-whammy for smokers: They have less discretionary income to buy a product that governments see as a way to balance their own strained budgets.
The federal government more than doubled its cigarette tax to $1.01 a pack April 1 to help pay for children’s health insurance. A proposed $1 a pack state increase that would double the existing 98-cent tax passed the state Senate on April 2, in the hopes that smokers can help pare down Springfield’s mountain of backlogged Medicaid payments. Smokers in Cook County pay an additional $2 a pack on top of that.
McHenry County government employee Bob Ivetic walked back into his Woodstock office after a Thursday afternoon smoke break. When asked whether the tax increases were affecting his 20-year habit, he pulled two foil-wrapped pieces of nicotine gum out of his breast pocket.
“They’ve priced me out of the market,” Ivetic said.
Tobacco Stop owner Milos Grcic could not put a number on it, but said his Cary store loses business with every increase. He said his customers believe that they are being singled out unfairly to solve state government’s irresponsible spending.
“I think that they’re unfairly targeting this same group over and over again for what the state believes is quick revenue,” Grcic said.
Illinois is one of 22 states that, as of April 9, had legislation pending to raise tobacco taxes, according to the National Conference of State Legislatures. Gov. Pat Quinn highlighted cigarette taxes as part of a plan to decrease the state’s $11.5 billion budget deficit, and the plan, Senate Bill 44, predicts an additional $1 tax would generate at least $350 million more a year.
Quinn and the rest of Springfield likely will end up disappointed, said John Nothdurft, budget and tax legislative specialist for The Heartland Institute, a Chicago-based free-market think tank. Nothdurft in an April 1 paper stated that only 16 of the past 57 state tobacco tax hikes met or exceeded revenue estimates, and at least one, New Jersey, lost money.
“I would be absolutely shocked if [Illinois] made that amount of money, considering the federal tax increase,” Nothdurft said. “Now you’re trying to put a state tax increase on top of it, and then combine this with the increase in smoking bans.”
Nothdurft said people instead will buy cigarettes illegally, through the Internet or from states with a smaller tax. McHenry County smokers won’t get a break crossing the nearest state line – taxes are $1.77 a pack in Wisconsin. But Indiana taxes $1 a pack, and Missouri smokers pay 17 cents in state tax.
But anti-smoking groups say that states, in fact, see more revenue. An analysis of cigarette tax hikes in 15 states in 2005 and 2006 by the Campaign for Tobacco-Free Kids concluded that the states received more money than had they not raised sales taxes.
The American Lung Association added that revenue projections did not take into account the money saved by the corresponding drop in smoking. Its Upper Midwest chapter estimated that smoking cost Illinois $10.6 million a day in lost productivity, and that an additional $8.7 million was spent in the state daily on smoking-related health care costs.
The association predicted that the new Illinois tax, if approved, would drop youth smoking by 12.5 percent and prompt 52,000 more adults to quit. Vice President of Advocacy Kathy Drea said the call volume to the state’s stop-smoking line, which the association operates, had doubled from 300 to 600 since March 1, the month before the federal tax hike.
“Any time there’s an increase in price, we see an increase in calls, and this is being reflected in every quit line everywhere in the United States,” Drea said.
The McHenry County Department of Health typically does not see surges in calls for its smoking cessation classes, which consist of groups of six to eight smokers for the six-week group counseling course. But among the new group, which started the day the federal tax took effect, a lot of the participants’ motivation was because of the impending price increases, health promotion coordinator Karen Ciesielczyk said.
Illinois has raised cigarette taxes 13 times since 1941, according to a 2006 report from the Illinois Commission on Government Forecasting and Accountability. The present 98-cent tax ranks 28th in the nation, between the $2.75 a pack that New York residents pay and the 7 cents a pack that South Carolina smokers pay.
Nothdurft said that state governments’ reliance on “sin” taxes during bad economic times did not do taxpayers a service. He said governments look to such taxes for a quick fix that allows them to avoid trimming the fat out of their budgets.
“This is really just a way of getting more money for government spending without making the tough decisions,” Nothdurft said.