Illinois’ $1-a-pack increase in cigarette taxes isn’t bringing in the kind of money that lawmakers had expected in its first year.
The increase raised the state excise tax on a pack of cigarettes from 98 cents to $1.98. The tax hike is expected to bring in $212 million in extra money for the current fiscal year, almost 40 percent less than the $350 million officials projected when it took effect last June.
That’s both good and bad news. On the one hand, it means that more people have used the tax hike as an excuse to quit smoking or to smoke less. On the other, it means the state is collecting less money than it hoped from smokers as it seeks to meet its financial obligations. Cigarette tax revenue goes into the state’s general fund, Medicaid program and School Infrastructure Fund.
Such is the pitfall inherent in using sin taxes to balance budgets. Smokers make up about 20 percent of the state’s population and can be completely alienated without costing anyone an election. But when taxes make the “sin” more expensive, the sinners are more likely to cut back or quit altogether.
Politicians like to point to increasing tobacco and other sin taxes as a means of making people change their behavior. In reality, many governments would be left with gaping holes in their budgets if Americans suddenly saw the light and decided to give up smoking, drinking, and gambling en masse.
In the case of smoking, taxing the habit out of existence might be the only way to make people stop. Decades of warnings from the Surgeon General and pushing smokers off of airplanes, out of restaurants and bars and into the back alleys have not been enough.
However, if politicians want to make smoking prohibitively expensive, they probably shouldn’t count on the revenue to balance their budgets.