Illinois Legislature Voting on Increasing Tax Collections in Missouri
Illinois is voting tonight on whether to raise their cigarette tax by a full $1. If this passes — and I don’t care either way, as a non-smoker who doesn’t live in Illinois — there can be no doubt it will be good for tobacco tax collections in Missouri. Nobody can doubt that at least a small portion of Illinois residents will shift their tobacco purchases to Missouri and other nearby states, leading to more business and higher tax collections here, but without any increase in Missouri smokers’ costs.
I would guess that most Illinois residents who can easily purchase smokes or gas in Missouri — such as the many St. Clair and Madison County residents who work in downtown St. Louis — already do so. The current tax difference on cigarettes is large enough to distort economic decisions. If the Illinois legislature increases it by another $1, the marginal changes might not be as large as one would expect, but they will certainly exist, and to Missouri’s benefit.
In the past, this typically has been a regressive tax on Illinois residents. Those who have the means to inexpensive transportation (ie, a functioning automobile) will be able to cross the border into Missouri, Indiana, Wisconsin, Iowa or Kentucky for their cigarettes and gasoline. Those who rely on public transportation (which tends to be the lower socioeconomic classes in Chicago and East St. Louis) will be stuck paying the higher taxes.
Thos of us who live near Iowa or Indiana already know that there is a significant difference in the price of a gallon of gasoline in Illinois compared to the surrounding states. This already impacts my decisions on gasoline. Were I interested in buying cigarettes, I am sure that it would impact that decision as well. I suppose the good news is that it will likely decrease teen smoking, since that is most impacted by the price of cigarettes.
Comment by Bill H — May 9, 2010 @ 12:01 a.m.