Illinois Eyes Tobacco Tax Hike

Illinois cigarette tax would leap by $1 over two years under a proposal a Senate committee approved today hoping to come up with more money to pay down the state’s big backlog of Medicaid bills. But the Illinois Association of Convenience Stores warned lawmakers that the proposal is a fiscal nightmare that will cause the state to lose much-needed revenue instead.

The legislation would increase the state’s 98-cent tax on a pack of cigarettes by 50 cents this year and another 50 cents next year, the Chicago Tribune reported. Lawmakers are looking at an Illinois increase as the new federal 62-cent hike is set to take effect April 1.

The Illinois proposal, sponsored by Sen. Jeff Schoenberg (D-Evanston), is aimed at taking advantage of a temporary boost in the amount of matching funds the federal government will give states through the stimulus package. Schoenberg estimated the legislation could generate $1 billion over two years.

The Democrat-controlled Senate Executive Committee advanced the state tax increase on a party-line 7-5 vote and it now goes to the full Senate.

Industry Backlash Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores, said a new increase in the state cigarette tax would hurt state convenience stores and gas stations because customers will cross into other states for cheaper cigarettes. It’s a scenario that has played out in other markets like New York City and all across New Jersey.

“It will make the borders wider and more attractive, and it will cost Illinois’ tax dollars and Illinois’ jobs,” Fleischli said.

New Gov. Pat Quinn proposed a $1 state cigarette tax increase as part of his own budget proposal this month, but a spokesman had no immediate comment on the Senate.

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