Cigarette Tax Could Lead to Tobacco Smuggling

A proposed cigarette tax in Illinois could result in large-scale cigarette smuggling, according to a recent study by a Michigan research institute.

The proposed cigarette tax hike was introduced by Illinois Senate President John Cullerton as a way to generate more money for the state construction program.

Cullerton’s plan is to raise the state cigarette tax to $1.98 per pack.

According to research, smuggling rates increase when government imposes higher levies and when those levies are significantly higher than in neighboring states, Business Wire reports.

According to the Mackinac Center for Public Policy, 5.9 percent of all cigarettes consumed in Illinois in 2009 were smuggled in from other states. Nearby Michigan has the 10th-highest smuggling rank in the nation. According to Business Wire, one reason for this is because Michigan has a $2 per pack tax on cigarettes.

In 2009, Illinois ranked 30th in the nation when it came to smuggling. However, some people believe that number could increase to 26.3 percent if even a $1 tax hike passes. If a $2 tax hike passes, nearby Missouri’s 17-cents-per-pack tax would make it more enticing for criminals to smuggle cigarettes into Illinois.

Advocates of the plan, however, say it would generate nearly $377 million in annual revenue for the state. But a steeper cigarette tax could mean the state would lose $250 million, or approximately two-thirds of the expected revenue, to smuggling.

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