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Illinois Cigarette Tax Hike Could Offset Medicaid Cuts, Gov. Quinn Proposes

Posted: Updated: 04/23/2012 2:46 pm

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As part of a larger strategy to help balance the budget of Illinois' Medicaid program, Gov. Pat Quinn has proposed raising the tax on cigarettes across the state -- an idea that's been gaining momentum and support from lawmakers, activist agencies and the public.

Quinn's 2013 budget plan brought with it a harsh reality: $2.7 billion in cuts required of the state's pension system, which could impact health care access for poor Illinoisans the most.

Quinn delivered a proposal outlining his plan to balance Medicaid's budget last Thursday, which included $1.35 billion overall cuts, a $675 million rate cut for Medicaid providers, and a surprising additional suggestion: a $1-per-pack cigarette tax increase, according to the Chicago Tribune.

It's a strategy the state has seen before. In 2011, Illinois Senate President John Cullerton proposed the same tax hike as a last-ditch effort to save capital projects after the initial spending bill was shot down by the state courts. But the hike--which proposed the same state tax increase Quinn's advocating now, to $1.98 a pack--didn't gain traction.

This time around, Quinn has more vocal support. Both the Chicago Sun-Times and the Chicago Tribune ran editorials since the budget was revealed endorsing Quinn's plan, including cigarette tax.

From the Tribune:

Enter the $1-a-pack cigarette tax, which would generate an estimated $337.5 million. Because Washington matches each state dollar spent on Medicaid, the state's gain would double, to $675 million. We support this hike for two reasons: Medicaid, which provides care for smoking-induced illnesses, needs the money; the American Cancer Society estimates that tobacco cost Illinois $1.5 billion in Medicaid spending last year. And making cigarettes costlier means many people will quit or never start.
Critics of the plan say that the lower prices for cigarettes in border states could drive business out of Illinois and hurt small retailers. Amir Rasheed, owner of a BP Station in Rock Island, told KWQC News his business, close to the Iowa border, would suffer from a tax hike. Some Republican state legislators have made the same argument.

"Who would want to pay a dollar more for cigarette in Illinois," Rasheed told KWQC. "You know you can go and get them cheaper in Iowa. Everybody is going to Iowa to buy gas in Iowa, everybody would want to buy a cigarettes there too."

The Sun-Times editorial agrees that reduced sales numbers are not insignificant: one Riverside gas station saw sales plummet from 110,000 packs per month to 17,000 after the Cook County sales tax on cigarettes doubled in 2006.

But as the newspaper notes, the American Cancer Society's findings suggest that reduced sales could mean reduced tobacco use, which would have a significant impact on the overall financial health of the state and its Medicaid program.

Cullerton's office warned the governor about the difficulty similar legislation has encountered.

"The Senate has twice passed a cigarette tax only to have the measure fail in the House," Rikeesha Phelon, a spokeswoman for Cullerton, told Reuters.

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Filed by Lizzie Schiffman  |