Raising smoking taxes leads to higher taxes for everyone

Chicago's Millennium Park

As I've stated many times before, raising cigarette taxes means higher taxes for non-smokers too. Revenue from the new "sin tax" never matches forecasts and of course spending never slows down.

Rahm Emanuel wants to add another 75 cents to Chicago's cigarette tax--which if enacted will give Chicagoans the nation's highest smoking tax.

From the Daily Herald--paid registration required:

While state lawmakers continue to increase taxes on liquor, cigarettes and gambling, revenues from the so-called "sin taxes" aren't keeping pace. At $1.95 billion, 2012 revenue from those taxes was almost on par with that of 2003, even though most tax rates increased significantly, according to a Daily Herald analysis of Illinois Department of Revenue financial reports.

Some experts argue that the higher taxes are pushing away users who are finding cheaper alternatives in other states or on the Internet.

"One of the things people forget is that what they can do generating tax revenue, they still have to be careful about what the nearest inexpensive alternative is," said Willard Manning, a health economist and professor at the University of Chicago. "At a time when state and local government are having financial problems, raising revenues on these items becomes an inviting target. But for the revenue piece, you'd think they'd recognize what's going on and what's driving business away."

Since tobacco taxes were raised in 2002, revenues steadily have declined to pre-hike levels as cigarette purchases dropped in Illinois. Legislators last year doubled tobacco taxes, but revenue did not keep up. After getting $609 million in tobacco taxes in the previous fiscal year, the state generated $856.5 million from tobacco taxes in the fiscal year that wrapped up a few months ago, according to the state legislature's Commission on Government Forecasting and Accountability.

It's not all because people have cut back on tobacco use.

And it's not just the internet or other states where smokers can avoid higher cigarette taxes--the black market is always ready to step in.