Cook County’s attempt to sin tax its way out of $267.5 million budget shortfall

Cook County faces a projected $267.5 million budget shortfall for fiscal year 2013. Cook County Board President Toni Preckwinkle has a solution: Fill the gap with higher taxes on cigarettes, guns, ammo, gambling and businesses. “We have structural problems that demand structural solutions” Preckwinkle said. The problems are structural, but Preckwinkle’s solutions are not. Tinkering with the tax...

Cook County faces a projected $267.5 million budget shortfall for fiscal year 2013. Cook County Board President Toni Preckwinkle has a solution: Fill the gap with higher taxes on cigarettes, guns, ammo, gambling and businesses.

“We have structural problems that demand structural solutions” Preckwinkle said.

The problems are structural, but Preckwinkle’s solutions are not. Tinkering with the tax code by adding a laundry list of tax hikes will deter consumption and punish business activity, not solve the county’s budget woes.

Preckwinkle plans to hike the county’s tax on cigarettes by $1 per pack. But during her budget address, she failed to mention that the tax hike would hit Cook County’s low-income earners the hardest. According to the Heartland Institute, “Not only are lower-income earners more likely to smoke, they also smoke more frequently. They bear more of the tax burden than higher-income earners, in absolute terms and as a percentage of income.” Preckwinkle also left out the fact that tobacco taxes are notoriously unreliable sources of revenue; that more than 70 percent of cigarette tax hikes fail to bring in the expected revenue; and that the tax hike could prompt more smuggling and criminal behavior.

In reality, smokers will find a way to acquire cigarettes at the best price – whether that means stockpiling smokes before the tax hikes hit or crossing borders to purchase the product from neighboring states with lower tobacco taxes.

Preckwinkle’s budget solution also taxes ammunition and firearms at 5 cents per bullet and $25 per gun. But others on the board believe that these tax hikes will do little to curb gun violence. “I don’t think a nickel a bullet will cause a shooter to rethink pulling the trigger,” said Cook County Board Commissioner John Fritchey.

Like the cigarette tax, the “violence tax” will simply push consumers to purchase their guns and ammo outside of Cook County.

The third sin tax Preckwinkle advocates is an $800 per year tax on gambling machines.

But these sin taxes aren’t enough to cover the $267.5 million hole in Cook County’s $3.3 billion budget. The cigarette tax would bring in an estimated $25.6 million next year; the guns and ammunition tax would bring in about $1 million; and gambling tax revenue would total about $1.3 million. Preckwinkle plans to make up some of the difference by taxing businesses that buy non-titled items (office supplies, equipment, building materials and artwork) outside the county’s borders. But the $15 million this new business tax is expected to generate won’t fill budget gap and is a far cry from a “structural solution.”

Preckwinkle argues that the policy is straightforward – businesses that chose to purchase certain goods outside of Cook County will pay a little more. She labeled the tax as “pro-business” because it motivates business owners to buy locally.

If the board president were serious about promoting local businesses in Chicago, she’d focus on reducing the total tax burden on businesses and consumers, not pushing through these targeted tax increases. Instead of a micromanaged tax code, Cook County’s economy and taxpayers would benefit from a stable and predictable tax environment.