Gov. Quinn's Tax Hike Doesn't Add Up

As previously noted, Illinois Gov. Pat Quinn is proposing a $1 per pack tax increase on cigarettes, aimed at helping to eliminate a $2.7 billion shortfall in the Prairie State’s Medicaid funding.

However, those keeping tabs on Medicaid negotiations in Springfield have spotted a problem with Quinn’s plan that goes beyond its emphasis on tax hikes: It looks like Quinn may be inflating the amount of revenue the state could potentially derive from the plan, risking further budgetary issues down the road due to getting the numbers wrong now.

As pointed out by Illinois’ CapitolFax blog, Quinn has been estimating that the proposed tax increase would bring in something in the range of $340 million a year more, for a total of $700 million a year when you add in federal matching funds.

However, the Campaign for Tobacco Free Kids– no slouch when it comes to touting the potential revenue-enhancing benefits of tobacco tax increases– said in 2010 that a $1 per pack cigarette tax hike, exactly what Quinn is now proposing, would bring in nearly $300 million a year.

That is $40 million a year or so less than Quinn now estimates.

Since 1996, smoking rates in Illinois have been on an overall decline, according to Centers for Disease Control data, which skeptics say make Quinn’s claim to be able to get more total revenue bang for his current buck-a-pack increase even more dubious.

Meanwhile, it appears that even some Democrats are questioning the wisdom of Quinn’s plan, with State Sen. Gary Forby (D-Benton) telling Illinois’ Journal Gazette and Times-Courier that people in his district “[like] to smoke. When you do a tax on this, they go over in Kentucky, they go over in Indiana and they buy them cheaper. They just quit spending money in the state of Illinois.”

Those doubtful of the merits of passing the tax increase view the prospect of such cross-border purchases as another point that draws into question whether Quinn might be inflating his numbers, and if so, by how much. As State Rep. Dan Brady (R-Bloomington) put it this week, “All I know is the last time we did a cigarette tax increase, everyone started heading for the borders of other states.” Brady opposes Quinn’s suggested increase.