Chicago: Cigarette Taxes Reach $6.67, Pushing Price to $11 Per Pack
March 1st, 2013
When governments seek to raise revenues, sin taxes are an easy sell, politically-speaking. After all, products like cigarettes can lead to serious health problems. However, when sin taxes are driven up too far, they become a de facto form of prohibition for poverty-stricken addicts. As such, many of prohibition’s social costs emerge under excessively punitive taxation schemes.
The Chicago Tribune is reporting that the Cook County government just raised taxes on cigarettes by $1, pushing Chicago’s total city, county, and state cigarette tax to $6.67 per pack. Prices are set to surge to $11 per pack, and some entrepreneurs are capitalizing off of this by selling cigarettes off the books to avoid the outrageous taxes. Let’s consider the unintended consequences of this well-intended initiative.
Chicago’s New Cigarette Black Market
The above-linked article cites recent examples of stores selling cigarettes illegally to avoid the harsh taxes. The higher that sin taxes rise, the greater the temptation is for stores to sell them without the tax stamp. The politician responsible for the recent tax increase, Cook County Board President Toni Preckwinkle, admitted as much, “We anticipate that there may be some noncompliance, as there always is when you institute an increase like this.”
In concert with the tax increase, Preckwinkle indicated that the county would need to hire more bureaucrats to enforce the tax and penalize local businesses for non-compliance. This will increase costs, seemingly defeating the original purpose of raising taxes to generate more revenue.
Cook County’s Motive Is Not to Increase Revenue
In the past, cigarette tax increases have reduced the total revenue realized by Chicago’s state, county, and municipal governments. Politicians believe that the higher taxes have reduced cigarette smoking, but, in reality, it’s difficult to track how many of those smokers continued their habit but began purchasing un-taxed cigarettes from a black market provider. Also, cigarette smoking has been in decline everywhere, even in states where cigarette taxes are low.
Preckwinkle believes that this tax increase will cause individuals to quit smoking, thus improving their lives. However, she fails to realize the harm that will be done to those who simply can’t shake the habit. A two-pack-per-day smoker will have to pay $22 a day to stop the symptoms of withdrawal. That’s $660 per month. For the poverty-stricken, such a price increase makes cigarette smoking as expensive as a narcotics habit. When people are addicted to something, they’ll do nearly anything to get it. Smokers in Chicago may soon begin stealing or committing crimes to afford their habits, much like methamphetamine addicts do now.
Sin taxes target addicts unfairly. Also, they turn the government into a drug dealer by tying vice profits to public funding. When the government is reliant on cigarette smokers to fund certain programs, a natural conflict of interests arises where the government benefits when people start smoking. Taxes should not be allocated based on the perceived level of danger of products. It’s impossible to put Nerf foam on everything in life. People will take risks, and some will make mistakes.
Cigarette taxes in Chicago and New York have escalated beyond normal taxation and have deteriorated into de facto prohibition.
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