Aldermen Applaud Mayor's $5.24 Billion Budget
Cigarette Tax Is Only Proposed Increase

November 3, 2005

CHICAGO -- Mayor Richard M. Daley on Thursday officially presented a $5.24 billion budget for 2006 that attracted a standing ovation from the City Council and a prediction from at least two aldermen of unanimous approval in December.

During an hour-long address at City Hall, Daley unveiled a budget that relies on only one increased tax -- the cigarette tax -- and for the third year in a row, holds the line on property taxes.

The $5.24 billion spending plan represents an increase of more than $140 million over the 2005 budget of nearly $5.1 billion.

Daley's budget proposal would increase the city's cigarette tax by 20 cents to 68 cents per pack. The proposal is expected to raise a total of $9 million in new revenue, assuming a 12 percent drop in cigarette sales.

Earlier this year, Daley's staff briefed aldermen on a proposal to raise up to $37 million in proposed new or increased taxes and fees, including higher parking fees and a first-ever tax on delivery companies such as FedEx. But all of those proposals were tabled except for the cigarette tax increase.

After the mayor's speech, Alderman Billy Ocasio, of the 26th Ward, said he does not believe there will be a repeat of 2005, when five aldermen voted against a menu of $86 million in tax and fee increases that were used to help balance that budget.

"I really don't see a lot of opposition on this," Ocasio said. "You know, it's a very safe budget. It's a very safe budget, it's a tough year. He's gone through a lot of things. This administration's gone through a lot of things. I think that it's a good budget for a tough year."

Alderman William Beavers, 7th Ward, chairman of the City Council's Budget Committee, also saw little chance of dissent from the council.

"I think it's a good budget and I don't think we have any opposition," Beavers said. "The mayor did a tremendous job. We put a number of figures out there early on, as you know, and we took them all off the table and came up with one tax, the cigarette tax."

Even though he is a smoker, Beavers said he does not have a problem with another increase in the city's cigarette tax because he hasn't bought his cigarettes in Chicago for a long time. Beavers even joked briefly that he might quit smoking.

"I'm thinking about it, but I've never had the urge to quit," Beavers said. "But, you know, as long as we have Indiana, you know, I can always smoke."

What Beavers does have a problem with is colleagues he calls "hypocritical" for pushing for an indoor smoking ban for most of Chicago, while not hesitating to continuously tax smokers.

"You know, they're hypocrites. In one way they want you to stop smoking but they want to balance the budget on the backs of cigarette smokers," Beavers said.

During his speech, Daley emphasized the need for the city to improve the delivery of social services in an effort to close the gap between rich and poor.

Invoking the image of New Orleans residents left stranded in the wake of Hurricane Katrina, Daley said every urban area in the nation reflects "rising poverty and a growing gulf between rich and poor."

"This was underscored by the tragedy in New Orleans, where the people with the least were literally left behind," Daley added.

To improve the city's commitment to social services, the mayor said, next year the city would hold a series of service fairs across Chicago similar to the assistance center that was set up at Fosco Park earlier this year to aid relocated victims of Hurricane Katrina.

At each of the fairs, every resident will be able to get information and apply for every social service offered by the city, Daley said. Parents will be able to enroll children in after-school, early childhood education and other education programs offered by the city.

Taxpayers will be able to apply for programs to obtain tax credits and apply for federal, state and local tax refunds.

Daley said the programs would be a pilot program to help establish three permanent social service centers in Chicago.

"We'll figure out what worked and what didn't. And we'll use that information to establish three permanent centers that will provide one-stop shopping for every city service," Daley said.
Read

There will be no increase on tobacco taxes in Illinois this year!

State lawmakers pass budget

Stop a Tax Hike in Illinois

In an effort to reduce the state budget deficit, Governor Rod Blagojevich has proposed raising state excise taxes on cigarettes by 75 cents per pack, an increase of more than 75 percent.  This is on top of the 70 percent increase that was imposed only two-and-a-half years ago!

The Congressional Budget Office has stated that excise taxes are the most regressive type of tax and tobacco excise taxes are "the most regressive of all."  Simply put, if enacted, this tax increase will disproportionately impact the poor and those living on fixed incomes.  

What's more, history shows that higher taxes do not produce projected revenue.  In the 1990s, after Canada learned that its excessive excise taxes resulted in both lost revenue and increased crime, the government scaled back the taxes.  A recent tax increase in Colorado is generating 24 percent less revenue than projected.

Even worse, in state after state, cigarette tax hikes have resulted in increased illegal smuggling, which has even been exploited by terrorist groups, like al Qaeda and Hezbollah, to fund their operations!             

The real solution to Illinois' budget deficit is clear:  Reduce spending; do not raise taxes.  

http://councilfor.cagw.org/site/PageServer?pagename=CCAGW_get_inv_Advocacy_ILTax_IssuePage

March 31, 2005

Gov. Blagojevich unveils comprehensive Higher Standards, Better Schools plan
Proposal increases school funding by another $300 million, and implements strict new high school graduation standards to better prepare Illinois students for college and the workforce

"The state must help schools eliminate overcrowding and give students and teachers better environments to learn and teach in.  In order to meet these needs and fund the state's other capital needs, the Governor proposed increasing the cigarette tax by 75 cents to pay the debt service on a capital program."

http://www.illinois.gov/PRessReleases/PressReleasesListShow.cfm?RecNum=3802

Letter: Tobacco tax corrupt

By The Daily Illini
March 14, 2005
Dan Parente
senior in engineering

I was somewhat concerned about the opinions expressed in Thursday's paper by Brett Hapeman of Colleges Against Cancer about Gov. Blagojevich's proposed 75-cent cigarette tax increase. Hapeman claims - quite correctly - that the proposed tax will prevent, by financial means, the creation of new smokers. Let me be clear: There are few things that irritate me more than watching my fellow humans kill themselves and those around them by smoking. I must protest, however, that it ought not to be the purpose of a tax to prevent or reduce the consumption of a good or service.

It is clear that the government has the obligation to acquire sufficient funds to administer the government and that excise taxes are a necessary tool, but it ought not to have the right to hijack the system of taxation to promote any particular social value. Indeed, if the people are willing to accept a tax on cigarettes, is there any reason why the government could not next impose a tax on foods contributing to obesity, a possibly even greater health threat?

I would welcome a statewide or national debate on health-related issues including the possibility of increased regulation of cigarettes. To skip this debate, however, in favor of implementing a solution to the health issues "in the name of generating revenue" is, at best, irresponsible to community voices that have meaningful opinions on this subject and, at worst, an outright corruption of the tax system
http://www.dailyillini.com/news/893492.html 

Smokers feeling unexpected burn
States demand taxes on sales via Internet

March 7, 2005
By Tim Jones
Tribune national correspondent

The one-page greeting from the Michigan Department of Treasury came out of the mailbox, but to Julia Sidebottom it may as well have come from the moon. Tucked amid the legalese was the line that said her boyfriend owed the state $4,797.87 in unpaid cigarette taxes.

"I was totally flabbergasted," Sidebottom said. "At first you don't know what to think. . . . I thought it was some kind of a joke."

Michigan, Illinois and other states are giving smokers who buy cigarettes over the Internet a lot to think about, in the form of letters notifying them that they owe thousands of dollars in taxes on bargain-priced smokes. More than 530 Michigan residents received tax bills in the past two weeks, with the average individual liability being $3,200.

In Illinois, about 1,300 people who bought cigarettes over the Internet are about to be notified that they must pay the state's 98-cent-per-pack tax, an Illinois Department of Revenue spokeswoman said.

The collection effort is part of a stepped-up campaign by states, including New York, Pennsylvania, Ohio and Oregon, to capture millions of dollars of unpaid cigarette tax revenue--as much as $2 billion annually--from hundreds of thousands of people who buy the cheap smokes over the Internet and avoid dramatically higher cigarette taxes in their home states.

In January, New York City's Department of Finance notified about 3,700 people that they had skirted the city's $3-per-pack tax by purchasing over the Internet. Some owed as much as $10,000 in unpaid taxes. Ohio has targeted 1,000 people for non-payment of cigarette taxes.

In Michigan, where thousands more cigarette purchasers soon will be notified, treasury officials referred the names of 121 people to the state police for criminal investigation because they bought more than 300 cartons of cigarettes over the Net tax-free, presumably to resell them.

"We're learning more about this, and we're getting a little better sense of the operation," said state Treasury Department spokesman Terry Stanton, adding that investigators have targeted 13 Internet sites and are obtaining the sales records in pursuit of Michigan residents who avoided the state's $2-per-pack tax.

Tax collection a problem

The collection of taxes for goods sold over the Internet is increasingly problematic for state and local governments. Recent studies project that they are losing tens of billions of dollars annually because many sales evade taxation. Tobacco sales are only a small part of the picture, but they are important because states increasingly rely on cigarette taxes to mend budget holes.

In recent years some states, such as California, tried--to little effect--to recover cigarette tax revenue, shut down Internet operations or prevent the smokes from being delivered. Now, driven by huge state budget deficits, 44 state attorneys general will meet in Washington this month to discuss the problem of tobacco sales over the Net and what they can do about the hundreds of Internet operations with such names as cheapsmokesbymail.com, cigs4free.com and notaxsmokes.com.

By going after the buyers of cigarettes, said Jeff Cohen, assistant chief counsel for the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, the "word is getting out" about big tax liabilities.

"I think most people realize that something must be fishy if they buy something at a fraction of the cost," Cohen said.

Sidebottom, who lives with her boyfriend in the northern Detroit suburb of Waterford, disputes that claim, arguing that she thought the cigarettes were a low-priced deal, as are many items sold on the Internet.

That doesn't matter to Michigan treasury officials; the tax is owed, they say. And they're putting the muscle on cigarette buyers and using them as public examples in efforts to cripple the sale of tax-free cigarettes.

The aggressive enforcement comes as more state legislatures are pushing even higher cigarette taxes to plug budget holes and pay for state programs such as public education and Medicaid.

Illinois Gov. Rod Blagojevich has proposed boosting the state's 98-cent cigarette tax by 75 cents. Iowa lawmakers are weighing an 80-cent increase in the state tax, currently at 36 cents per pack. Indiana lawmakers are considering a boost of as much as 40 cents in the state's 55 1/2-cent tax. In Ohio, the 55-cent tax could rise to $1.

Thirty-four states have raised cigarette taxes since 2002--by as little as 8 cents to as much as 75 cents--and as those levies have jumped, tobacco sales over the Internet have exploded, as have the number of online cigarette sites, estimated to number 800 to 1,000. New York has estimated it loses $500 million to $600 million annually from cigarette sales through the Internet, toll-free phone operations and American Indian reservations.

"As taxes go up, Internet sales go up," said Dana Bolden, a spokesman for Philip Morris USA, the giant cigarette manufacturer. Indeed, online buyers can save 50 percent or more depending on the tax level where they live.

One private study projected that online cigarette sales could reach 14 percent, or more than $5 billion, of total U.S. sales by the end of this year.

Austan Goolsbee, an economist at the University of the Chicago who co-authored a study last fall on cigarette taxes and Internet sales, forecast that tobacco tax collections would be diluted by 25 percent to 40 percent as a result of online competition. Goolsbee said the "root of the problem for the states is that it is hard for them to enforce" a 1949 federal law that requires dealers who ship cigarettes across state lines to individuals to report the sale to the buyer's home state.

State enforcement is further complicated because most Internet cigarette operations are based on American Indian reservations, where state jurisdiction often is unclear.

Federal responsibility remains scattered, although the General Accounting Office recommended in a 2003 report that jurisdiction for handling Internet cigarette operations be given to the Bureau of Alcohol, Tobacco, Firearms and Explosives, an arm of the U.S. Justice Department.

States adopt strategy

For now, though, a growing number of states are attacking the problem by subpoenaing the sales lists of Internet operations. In that regard the effort resembles the moves of the recording industry's fight several years ago against Napster, the former pirate music downloading service.

Sidebottom, who said her boyfriend is in the early stages of Alzheimer's disease, complained that there was no warning from the state.

"When there was the big issue with Napster, at least there was some indication so you knew not to do it, so you stopped," she said.

Stanton, the Michigan treasury spokesman, said the state issued warnings after it raised the cigarette tax to $2 a pack in 2002.

Sidebottom argued that smokers are being persecuted while billions of dollars of retail sales over the Internet go untaxed.

"It's not politically correct for anyone to be a smoker right now, so they'll come after us," Sidebottom said.

"And this is just the tip of the iceberg. We're only in the first wave. I know any number of people who have purchased [cigarettes] online, and I tell them to be prepared because they're coming after you. They're scared to death, scared to death."
http://www.chicagotribune.com/

Stateline Smokers React Proposed Cigarette Tax Increase -IL

by Jarrett Dunbar February 16, 2005 - 1:00 pm - Rockford

Rockford, Illinois- During the State of the Budget address Wednesday, Governor Rod Blagojevich announced plan to raise the tax on cigarettes didn't shock stateline smokers.
"It's been increasing since I've been smoking," says Robert Keeton. "When I started, it was 55 cents a pack, and I'm still smoking today. Regardless of what he does, if you smoke, your gonna smoke all the time anyway."
States all around the country have been increasing the taxes on their cigarettes. The last time the cigarette tax was increased in Illinois was back in 2002, when it went from 58 cents to 98 cents. If the governor gets his wish, the tax will jump to $1.73 a pack. Stateline smokers think it's unfair the government continues to tax them.
"They're always trying to increase the price of cigarettes and they're always coming after the smokers," says Joe Grodecki. "If that's the way they are going to increase revenue, then it's a way to make revenue. Personally, I'm not a big fan of it."
The higher tax will increase revenue to the state, but it may have another affect. It could force smokers to give up the habit altogether.
"In time, I think will, especially if the rates keep going up and up and up," says Grodecki. "Right now, they're at 3.50-4 bucks a pack. A 75-cent increase is going to be about $4.50 a pack. It'll effect me some, but not too much."
http://www.wtvo.com/

I was asked for some information about Illinois' most recent tobacco tax increase and the officials responsible for it.  I found our Cook County increase from 2004.  Notice how sneakily it had to be passed.  Sound like Congress.  They couldn't get the increase passed on it's own merit, so it was tacked onto the county's almost $3 billion annual budget instead!!!  I thought the mechanics of the increase were worth sharing here.
 
Garnet Dawn
The Smoker's Club, Inc.
Midwest Regional Director
The United Pro Choice Smokers Rights Newsletter - http://www.smokersclubinc.com
Illinois Smokers Rights - http://www.illinoissmokersrights.com/
mailto:garnetdawn@comcast.net - Respect Freedom of Choice!

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COOK COUNTY 2004 $.82 PER CIGARETTE PACK TAX INCREASE
 

This was the most recent tax increase in Illinois. I don't have records of earlier ones. 

It would be interesting to learn if the tax proceeds, since the Cook County (including Chicago) tax increase in the beginning of Fiscal year 2004, have been deposited into the specified "Tobacco-Healthcare Distribution Fund" created in the treasury of Cook County.  They gave themselves any existing tobacco tax revenues in a general fund.  (See below)

The decision makers for this increase should have been the Cook County Commissioners Board, but they did not have enough votes to approve the tobacco tax increase.  Instead it was passed in February by the Finance Committee as a portion of the 2004 $2.99 billion budget.   Since the voting records of the Commissioners and their comments are informative, I have also copied them below.

Cook County Commissioners in favor of the tax increase were Butler, Collins, Daley, Maldonado, Moreno, Murphy, Sims, Steele and President Stroger.

http://www.findarticles.com/p/articles/mi_qa3646/is_200403/ai_n9347830

ILLINOIS: Tobacco Tax: Cook County Raises Tax

State Tax Review,

Mar 9, 2004

The Cook County, Illinois, cigarette tax rate has been increased from 18¢ per pack to $1 per pack, effective April 1, 2004. The 82¢ increase was included in a $2.99 billion balanced budget approved by the Cook County Board of Commissioners on February 24, 2004. The cigarette tax increase was approved by the Finance Committee in early February after the Commissioners failed to garner enough votes to pass a new county lease transaction tax or an increase in the county sales tax rate. (Telephone Conversation, Cook County, Illinois, Board of Commissioners, February 24, 2004.)

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http://www.jointogether.org/sa/news/summaries/reader/0,1854,570255,00.html

Chicago's New Cigarette Tax Second Highest in Nation
4/5/2004

An 82-cent-per-pack cigarette tax hike that went into effect April 1 in Cook County, Ill., which includes Chicago, gives the county the second highest tobacco tax in the nation behind New York City, the Associated Press reported April 2.

With the new tax, the average cost of a pack of cigarettes in the county is about $6.

The tax increase, approved by the Cook County Board in February, is aimed at helping smokers quit and preventing youngsters from starting. "I'm convinced that we will save many thousands of kids and adults from smoking," said Cook County Commissioner Robert Maldonado.

Tobacco maker Philip Morris USA said the tax hike by the county and one under consideration next year could have unintended consequences. "Over the past two years, as a record number of states have sought to address budget issues by using increases in excise taxes, there's been an increase of illegal or contraband activity in cigarette sales," said spokeswoman Jamie Drogin.

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 Note:  All proceeds were to be deposited in the Cook County Bureau of Health  "...For expansion of existing programs or the development of new health programs which specifically address tobacco-related illnesses, which shall include but shall not be limited to, cessation of smoking classes, educational programs aimed at stopping smoking and the direct treatment of diseases such as sarcoidosis, emphysema, asthma, chronic bronchitis, lung cancer, cystic fibrosis, pneumonia, pulmonary hypertension, tuberculosis and any other disease related to the lung and heart."  

 Commissioners voted as follows:

 Yeas:
 Commissioners Butler, Collins, Daley, Maldonado, Moreno, Murphy, Sims, Steele and President Stroger (9)
 

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Nays:
 Commissioners Claypool, Gorman, Goslin, Hansen, Peraica, Quigley, Silvestri and Suffredin (8)
 

Section 3.        Tax Distribution Fund

 (a)  Such sum as was collected from the Retail Sale of Cigarette Tax Ordinance in Fiscal Year 2003 shall be transferred to the general fund of the County of Cook.

  (b)  Beginning in Fiscal Year 2004, all proceeds from the Retail Sale of Cigarette Tax Ordinance shall be deposited in a "Tobacco-Healthcare Distribution Fund" created in the treasury of Cook County.

  (c)  All amounts collected, beginning in Fiscal Year 2004, shall be used by the Cook County Bureau of Health for expansion of existing programs or the development of new health programs which specifically address tobacco-related illnesses, which shall include but shall not be limited to, cessation of smoking classes, educational programs aimed at stopping smoking and the direct treatment of diseases such as sarcoidosis, emphysema, asthma, chronic bronchitis, lung cancer, cystic fibrosis, pneumonia, pulmonary hypertension, tuberculosis and any other disease related to the lung and heart.

  Section 4.  Effective Date.  This Amendment shall become effective upon its passage.

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http://www.co.cook.il.us/secretary/CommitteePages/Meeting%20Reports/Finance%20Committee/2004/2-3-04.htm

REPORT OF THE COMMITTEE ON FINANCE

December 16, 2003

(recessed and reconvened on February 3, 2004)

Commissioner Peraica spoke in opposition to the proposed cigarette tax increase.  Commissioner Peraica further commented that streamlining and reducing the cost of County government must be realized without increasing any tax.

Commissioner Claypool stated that if the proposed sales tax increase were levied, the decline in sales of cigarettes would negatively impact city and state revenue.  Further, if these governmental bodies were to raise cigarette taxes to counteract declining sales, county sales of cigarettes would decline further.  He further stated that the proposed tax increase would eliminate entry-level jobs.

Commissioner Hansen stated that he knows of no statistics that correlate cigarette sales to health benefits to the community.  He asserted that increasing the value of cigarettes by increasing their tax would stimulate both the black market and turf war, and would induce related crimes.

Commissioner Suffredin introduced the amendment, which would funnel revenue from the proposed cigarette tax increase into a special tobacco healthcare distribution fund that would be used by the Cook County Bureau of Health Services to expand existing programs or develop new programs which specifically address heart and lung diseases.....