Forget about whether a tax hike on cigarettes is good or bad, lets concentrate on this specific tax legislation in Illinois. The proponents of this tax hike, mostly Democrats with some Republicans also, and all the anti-tobacco special interest groups out there are claiming this tax hike will bring in $350 million addition tax dollars to Illinois. The feds will then match that $350 million for a total of $700 million that Quinn wants to spend on Medicaid.
Here is the problem with this legislation. They are lying about the revenue projections. It won't bring in $350 million. So what? Well, this legislation appropriates all of that $700 million to be spent ASAP regardless of whether or not the state sees all of the $700 million promised. This legislation spends all the money without any back-up plan if revenues come in lower than the projections.
Nobody seems to care that they are going to spend the money even though the revenue projections are most likely way too high. Its baffling, but it explains perfectly the financial mess this state and this country finds itself in. They may be using their hearts to support a cigarette tax increase, but they aren't using their brains one bit in managing those funds in a responsible manner.
I've been paying attention to tobacco tax hikes for a decade now, but here is one recent article on this Illinois tax hike that shows the folly of trusting the revenue promises.
Sadly, the governor does not seem as eager to meet with fiscal reality as he claims: That revenue estimate from the smoking tax is almost certainly inflated. The anti-smoking advocacy group Campaign for Tobacco Free Kids recently estimated that a $1 increase in the state smoking tax would raise a little less than $300 million — leaving the governor’s office at least $37 million short. But even those numbers probably overstate the tax’s actual revenue potential since cigarette taxes consistently produce less money for state coffers than expected. Between 2003 and 2007, states raised cigarette taxes 57 times. But according to the National Taxpayers Union, only 16 of those hikes met revenue projections.16 out of 57. So there is a 72% chance that these revenue promises are overblown. Then what? They spend $700 million, but only end up collecting $500 million and are $200 million short on this year's budget. They pass that $200 million deficit onto next year's and increase the $9 billion they are already behind on their bills. So which tax gets raised next year or what spending gets cut next year to cover that $200 million? They don't know, and apparently they don't care either. That is the recipe for bankruptcy.
Here's the message kids, you shouldn't smoke but insane fiscal policies that throw more of you kids into poverty and puts you further in debt before you are even an adult are just hunky-dory.