Cook County, Ill., Holds Line on Spending, Raises Sin Taxes

Cook County, Ill., Holds Line on Spending, Raises Sin Taxes
December 5, 2011

The Cook County, Illinois board of commissioners went against years of rising spending and general tax increases by voting 16-1 to pass a budget that holds the line on spending and rejects general tax increases, though it does raise “sin” taxes and fees a projected $51 million a year.

The only nay vote was cast by William Beavers (D), a commissioner from the South Side of Chicago who is a political rival of Board President Toni Preckwinkle (D).

The $2.94 billion budget, approved in November, includes nearly 800 layoffs and a quarter percentage-point cut in the county’s share of the retail sales tax.

“The spirit of compromise and collaboration that allowed us to pass this budget will continue in the weeks and months ahead as we continue to address the challenges that face Cook County,” Preckwinkle said in a press statement.

Big Alcohol Tax Hike

Before the budget vote, the county Finance Committee approved a 50 percent rise in alcohol taxes and new taxes on tobacco taxes other than cigarettes, including cigars and loose tobacco.  That vote was a bit more contentious, winning by a 12-5 margin.

According to Preckwinkle's office, “the county's tax on wholesale alcohol will increase, with the tax on a 24-pack of beer increasing by 6 cents, and the tax on a 750 ml bottle of vodka by no more than 50 cents.” 

"When the cost of alcohol is higher, younger people are less likely to drink and if they do drink, they drink less," Dr. Ramanathan Raju, CEO of Cook County Hospitals, said at a press conference shortly before the board’s vote.

“Illinois alcohol taxes are already higher than surrounding Midwestern states and increased dramatically in 2009 after Gov. Pat Quinn (D) signed a capital construction bill that hiked alcohol taxes to raise roughly $114 million in annual revenue,” noted the American Beverage Institute (ABI) in a statement. “After the 2009 tax increase, alcohol sales across the state border skyrocketed. Cook County’s proposal would push the rates even higher.”

One of Nation’s Highest Rates

“Alcohol is already one of the highest taxed consumer products in the United States, and Illinois has one of the highest tax rates in the country. Fifty-eight percent of the cost of every bottle of distilled spirits sold in Cook County already goes to taxes and fees,” said ABI managing director Sarah Longwell. “Too often, hospitality taxes are treated like an ATM to generate extra revenue to make up for wasteful government spending. As Americans struggle through tough economic conditions, Cook County could not pick a worse time to increase taxes.”

Distilled Spirits Council Vice President Dale Szyndrowski said in a statement, “While we appreciate the difficult position the commissioners are in with respect to the budget, the Chicago-area hospitality industry is also in a very difficult position—down 13,000 jobs since the recession."

After the vote, Commissioner Joan Patricia Murphy (D) said she agreed to the sin tax hikes because she “thinks the county needs the money” but added she believes businesses near the Indiana border “will take a financial hit” as shoppers cross the state line to avoid paying the higher taxes.

Possible Sales, Jobs Losses

Bill Spann, chief executive officer of the International Premium Cigar & Pipe Retailers Association, said Cook County consumers “are already paying high taxes on all tobacco products. If the County Board or City Council increases those taxes, consumers will take their business elsewhere. When consumers take their business elsewhere, jobs are lost and businesses are hurt. That’s not in the best interests of Cook County residents, whether or not they use tobacco products.”

Commissioner Beavers was equally pointed in his criticism of the tax increases.

“Whoever drafted this budget did it in the dark. All I see are poor man's taxes,” he said.

The Chicago-based Civic Federation, made up of business and professional leaders from Chicago and Cook County, said in a statement it supported the budget “because it reduces spending from FY2011, implements efficiencies and avoids raising broad-based taxes.” But some other business and taxpayer groups opposed the tax increases and worried about the consequences to local employment.

Calls for Long-Term Reform

John Nothdruft, director of government relations for The Heartland Institute (which also publishes Budget & Tax News), said Cook County “needs a commitment by the board to implement long-term cost-saving reforms that slow the increasing burden on future residents, not higher taxes on alcohol and other products.”

Kristina Rasmussen, executive vice president of the Illinois Policy Institute, says targeting politically incorrect products may seem easy, but that doesn’t make it right, especially for households already hit by a 67 percent increase in the state income tax in 2011.

“These tax increases might not make that big of a dent in the wallet of a high-flying lawyer out for a night on the town, but it could cost a waiter or a corner storeowner dearly,” Rasmussen said. “Industry analysts predict that the liquor taxes could cost upward of 270 jobs in Cook County, and the tobacco changes could result in 85 or more lost retailer and wholesaler positions."   

John W. Skorburg (jskorburg@heartland.org) is a visiting lecturer in economics at the University of Illinois at Chicago and associate editor of Budget & Tax News.