Wednesday, May 06, 2009

Cigarette tax phase-in

By Jamey Dunn
A proposed $1 a pack increase in the sales tax on cigarettes moved quickly through the Senate and awaits a final vote in the House. Although the bill, as written, has momentum and solid support among Democrats, opponents made a case for a compromised version today.

The Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores commissioned a study by Illinois State University on the impact of the proposed increase. Both organizations say the increase would negatively effect retailers they represent.

Bill Fleischli, executive vice president of the Illinois Association of Convenience Stores said: “The convenience store industry is a major employer in the state of Illinois, with facilities in every county. If this tax is enacted, it will paralyze this industry. It will cripple expansion, cost Illinois jobs, and all this will slow an economic recovery that Illinois so badly needs.”

Opponents to the tax argue that it would drive customers to border states with lower taxes, and that while Illinois residents are in those states, they also would purchase gasoline and meals. Greg Blankenship, spokesman for the tax watch dog organization Illinois Alliance for Growth, said the tax hike is regressive because smokers tend to have lower incomes, and that it is unreliable because it could drive down cigarette sales in the state. He added that lawmakers seem unsure about whether the tax is meant to address a public health issue or create revenue for the general fund.

“Is the purpose of this tax to stop people smoking, or is it to plug a budget deficit?” Blankenship said. “I mean, you really can’t have it both ways.”

The study proposes a compromise that would still result in a $1 per pack increase. The measure that is in the House would increase the tax $1 over the next year. The study suggests increasing the tax over four years, a quarter per year, to avoid a sticker shock to smokers. The study claims that this model would result in more revenue in the long run because people would be more likely to accept a gradual increase and continue buying cigarettes in Illinois.

Don Apgar, division manager for Martin and Hayley Inc., which operates Huck’s convenience stores throughout the Midwest, said without the sticker shock, fewer smokers might leave the state to buy cigarettes.

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