No, this isn’t a story about Mark Block. Out in the Land of Lincoln, the state is facing a serious shortfall in their Medicaid funding. (A story which is being repeated across the nation, in case you haven’t been keeping score.) But the Governor has a plan! Fear not, citizens. We’ll raise the money to help people with their medical bills by counting on people smoking more. What could possibly go wrong?
Illinois’ Medicaid program faces a $2.7 billion shortage that its governor has promised to deal with. So how does Gov. Pat Quinn propose to close the fiscal gap for his biggest budget item and largest health program? By relying on the state’s smokers to keep puffing — and paying — away…
There are two main reasons why cigarette taxes don’t bring in the bucks their supporters promise. The first is that higher taxes encourage smuggling from nearby low-tax states. Minnesota, for example, has been ratcheting up its cigarette tax for decades — and now has one of the highest rates of cigarette smuggling in the country, according to the state’s Department of Revenue. And after New York City hiked its cigarette tax by $1.42 per pack in 2002, a report by the city’s Independent Budget Office found that more than a quarter of the city’s smokers were avoiding the cigarette taxes. (Tax evasion cost the city an estimated $40 million in 2006.) This is a nationwide problem: Estimates indicate that states lose an estimated $5 billion tax revenue to tobacco smuggling each year.
These people never learn. We’ve previously shown you how other states have fared when they try to balance their budgetary foolishness on the backs of “sinners” with sin taxes. It doesn’t work. Regulating behavior by taxing it generally produces the exact opposite of the intended effect. If you don’t believe me, ask the moonshiners.
If you want to fix entitlement programs, do it. There are propositions on the table, even in Illinois. It’s going to require fiscal discipline and sacrifice on every level, but with enough willpower it could be done. But trying to buy your way out of it by scapegoating one segment of society, regulating free behavior and “taxing your way to prosperity” is a plan we’ve tried. Just look around to see the results.
But maybe.. just maybe… if we raise our voices now we can…
Ooops. Too late.