Cook County Businesses Burned by 450 Percent Cigarette Tax Increase
The Finance Committee of the Cook County (Chicago, Illinois) Board of Commissioners voted on February 3 to raise the county cigarette tax 450 percent, from 18 cents to $1.00 a pack. On February 23, the full Board approved a fiscal year 2004 budget that included the tax increase.
The tax increase proposal, passed after what observers called “spirited debate” in the committee, will go into effect on April 1.
The new tax brings the cost of a pack of cigarettes in Cook County to $5.63, including state, local, and federal taxes of $2.53. Finance Committee members had rejected two alternative tax increases proposed by County President John Stroger (D)--a quarter-percent increase in the general sales tax and a 4 percent business lease tax.
Although he wants Stroger to cut spending rather than raise taxes, Commissioner Larry Suffredin nevertheless called the cigarette tax increase a victory. “The one thing that we have done is we have killed a lease tax and a sales tax,” he said.
Negative Economic Impact
Before it voted 9-8 in favor of approving the 82 cents-a-pack cigarette tax increase, the Finance Committee heard testimony from opponents and supporters of the measure.
“Smokers will continue to smoke,” testified local businessman Jay Kent. “We will simply lose their business.” He warned, “Businesses will close and employees will lose their jobs, further compounding the drain on the county treasury.”
“You want to be a hero? Why don’t you raise it to $100 a pack and effectively make cigarettes illegal?” asked Robert Rinaldi, another business owner who spoke at the hearing.
According to the Chicago Sun-Times, the county’s revenue director, Barbara Bruno, said the hike likely would “cause cigarette sales to plunge 59 percent” in the county. She projected the tax hike would raise only an “extra $32.7 million,” about “$25 million short” of what’s needed to plug the county’s budget deficit.
“Anywhere you live in Cook County you are 30 minutes from buying cigarettes somewhere else,” Bruno said.
“Indiana is only 16 miles from my store,” noted a business owner at the hearing. Like many who spoke, he insisted most smokers wouldn’t stop smoking, but would simply drive to other counties to buy cigarettes at a cheaper price.
The representatives of anti-smoking groups appeared to disagree. Several spoke at the hearing, supporting the cigarette tax because, they said, it would deter many people from smoking, saving lives and millions of dollars in health care costs. But tax opponent Rinaldi, who owns a White Hen Pantry in Lincoln Park, scoffed at the idea that commissioners were concerned about public health, maintaining the board was simply trying to raise revenue.
“This is nothing more than a ploy to get revenue,” said Rinaldi. “It’s an insult to me.”
Spending Cuts Urged
“As a responsible businessman, when my revenues are down ... I look for ways to cut,” Rinaldi said, suggesting the board should, too.
Analysts for the Civic Federation, a Chicago-based tax policy and government research organization, agreed, issuing a report in December 2003 that insisted the County could address its budget woes with spending cuts rather than tax increases. “We urge you [Cook County] to look at our cost side, not just your revenue side. The county does not have a revenue problem. It has an expenditure problem,” said Laurence Msall, the group’s president.
“We do need to tighten the belt,” acknowledged Commissioner Bobbie Steele (D-Chicago), who nevertheless supported the tax increase. “It’s a new day in Cook County.”
Turf Wars Next?
Commissioner Carl Hansen of Mount Prospect, who voted against the cigarette tax increase, told the Daily Herald, a suburban newspaper, “commissioners would actually be contributing to crime by making bootleg sales of cigarettes attractive.” Three people in New York, where cigarette taxes were hiked from eight cents to $1.50 a pack, were recently killed in disputes over black-market territory, he said.
“Think of a carton. Think of $55 (the new price for a carton). Think of how valuable that is and how portable that is,” Hansen said.
“Remember Prohibition. And that’s what we’re getting toward.”
John Skorburg is managing editor of Budget & Tax News. His email address is email@example.com.
For more information ...
The Civic Federation’s 28-page analysis of and recommendations for the fiscal year 2004 Cook County budget are available online at the group’s Web site, http://www.civicfed.org.