Rahm Considers Tobacco Tax Hike Despite Costs to Poor

Chicago Mayor Rahm Emanuel may be looking to further hike Chicago tobacco taxes in a stealthy forthcoming budget move, reports UPI:

A spokeswoman for Chicago Mayor Rahm Emanuel declined to discuss hikes to the city’s cigarette and live entertainment taxes sources said he is considering.

“As he has said for the last two years, the mayor will not raise property or sales taxes and is looking to efficiencies first to balance the budget,” said Emanuel spokeswoman Sarah Hamilton.

If increased, the cigarette tax applied by Chicago could top the hefty $5.85 per pack levy imposed by New York City (at present, Chicago applies a $5.67 per pack tax on smokes), exacerbating an upwards price trend already evident from Illinois’ decision to increase its cigarette tax by $1 per pack earlier this year.

But experts say that if pursued by Emanuel, the tobacco tax increase could hammer the poor, in particular.

A recent study conducted by RTI International’s Public Health Policy Research Program indicated that in New York, where the state cigarette tax (separate from New York’s City’s own tax) runs at an astonishing $4.35 per pack, low-income smokers spend nearly 25 percent of their household income on cigarettes. Elsewhere across the nation, the average amount of household income expended is about 14 percent.

The tax hike could also encourage more illicit trade in cigarettes and diminish revenue available for spending, as Windy City residents look for a cheaper way to maintain their habit and avoid the higher rate of tax.

A 2010 study by the University of Illinois at Chicago already demonstrated a significant problem with regard to the consumption of untaxed cigarettes within the city. According to the report, 75 percent of cigarette tax receipts were lost out on due to smokers’ willingness to consume cigarettes purchased in lower-tax jurisdictions to avoid the high rate of tax payable in Chicago.

That, in turn, may explain why Chicago’s cigarette tax is expected to bring in just $18.8 million this year, as opposed to nearly double that amount brought in, in 2007.

These are factors that will no doubt weigh on Emanuel’s mind as he looks to craft a budget capable of covering Chicago’s financial obligations during the next year.