TWO TAXING ISSUES

 

As of this writing, the Illinois Legislature left two tax proposals on the table as they left Springfield without coming to agreement on a budget for the upcoming fiscal year. . One was Governor Quinn’s proposal to grant a state sales tax moratorium on back to school supplies and clothing and the other was to raise the tax on cigarettes. I am against both.

Leaders have set no date for a return to the capitol, but there is a May 31st budget deadline.

The sales tax moratorium that would run from August 6th-15th amounts to a 5% savings to the consumer. The legislation would reduce the state 6.25-percent sales tax to 1.25 percent. It would apply to clothing priced under $100, notebooks and markers, backpacks and classroom supplies. Computer laptops, though, wouldn’t qualify for the tax break.

Five percent is such a meaningless number that I do not see how it will help “spur sales and create jobs,” as State Rep. Jack Franks (D-Marengo) said. Last week I defended Franks in an unfair diatribe against him by State Rep. Bill Black, (R-Danville) but today I agree with Black who said, “It will cost $25 million to $50 million that the state cannot afford. It's an irresponsible thing to do when we don't have the money." Since the state currently has a $13 billion budget gap, how can the Governor propose tossing away millions?

Every day Kohl’s, Target, Wal Mart have sales of 50% off and more and we don’t see consumers running to the store to spend $1 billion just to sve 5%. (That is what is spent to achieve a 5% savings on $50 million). If a 50% off sale does not produce a spike in revenue for the stores how will a 5% tax savings do it? The stores are not going to hire more salespeople in anticipation of a one week tax moratorium so I don’t see how more jobs will be created.

To break it down more simply, the U.S. Census Bureau reports that the annual retail spending for Illinois is approximately $131,469,518,000. So $1 billion worth of spending is a basically a hick-up. The state’s population is about 13 million people. So each person would save about $4 while the state coffers would be denied $50 million in sales tax. FOUR DOLLARS per person?? What is the big deal about that? Unless you have a family with 100 members, that is not a lot of savings!

The fact that I am a smoker does not prejudice my opinion on raising the cigarette tax. I get my cigarettes in Indiana, so Illinois is already totally losing out on any tax revenue from me anyway. Hence it makes no monetary difference to me what the tax rate is here. Raising the rate only drives more people to Indiana.

The bill SB44, which would add another $1 per pack tax to cigarettes, also redefines the category and reclassifies “little cigars” as cigarettes. The Department of Revenue estimates the fiscal impact at $350 million during fiscal 2010 and 2011. I doubt that number because people will just buy their cigarettes elsewhere.

It is the redefinition of cigarettes that bothers me. “Little cigars” are not cigarettes and how can the legislature just randomly decide to change the classification? It would not irk me if they had chosen to include all sizes of cigars to be subjected to a higher tax; but why only “little cigars?” Obviously because politicians smoke BIG cigars and they don’t want to pay more for them!

The National Cancer Institute reports that cigars are worse than cigarettes for the following reasons:

A higher level of cancer-causing substances: During the fermentation process for cigar tobacco, high concentrations of cancer-causing nitrosamines are produced. These compounds are released when a cigar is smoked. Nitrosamines are found at higher levels in cigar smoke than in cigarette smoke.

More tar: For every gram of tobacco smoked, there is more cancer-causing tar in cigars than in cigarettes.

A higher level of toxins: Cigar wrappers are less porous than cigarette wrappers. The nonporous cigar wrapper makes the burning of cigar tobacco less complete than cigarette tobacco. As a result, compared with cigarette smoke, the concentrations of toxins are higher in cigar smoke.

Also, the larger size of most cigars (more tobacco) and longer smoking time result in higher exposures to many toxic compounds (including carbon monoxide, hydrocarbons, ammonia, cadmium, and other substances).

So when the deals are being made in the cigar-smoke filled back rooms, legislators should stop their puffing and postulating and make some solid decisions to solve the state’s budget crisis. The proposals on the table now are just all hot air and basically smoke and mirrors.