Illinois 3X taxes on Juul, Elf Bar, ZYN products to fund more spending
In another short-term revenue move, Illinois lawmakers July 1 turned to vape and other nicotine product tax hikes to allow ever-more spending. Taxes on vape products went from 15% to 45% of the wholesale cost.
Illinois state leaders just tripled the state excise tax on nicotine analog products, including vapes, nicotine pouches and e-cigarettes, from 15% to 45% of the wholesale price as part of their record $55.2 billion spending plan that started July 1.
Their 2026 budget increased state spending by $2 billion. Instead of enacting structural reform, lawmakers once again reached for short-term fixes such as the boosted nicotine tax.
Over the past 15 years, lawmakers have raised or created over 70 taxes and fees to support ever-growing spending. What they should have done is controlled overspending on pension obligations, health care and administrative bloat. Nicotine and other sin taxes are unstable, temporary revenue sources that unfairly burden Illinois residents least able to afford them.
Currently, 33 states and Washington, D.C., have excise taxes on vaping products. There are various ways states levy these taxes, including on manufacturing, wholesale, retail price or set amounts by volume.
Prior to the tax changes, Illinois ranked 17th in the nation with $0.39 in excise taxes per milliliter of vape juice. With the tripled rate, Illinois will now collect $1.17 per milliliter and ranks 10th.
State leaders expect to generate an extra $30 million in short-term revenue, but long-term effects may undermine that gain. The Tax Foundation found 26% of tobacco products consumed in Illinois were bought in other states, costing the state $291.1 million in tobacco revenue in 2022 alone. Indiana, with its lower taxes, was a major source of that loss.
Vapers are likely to behave like smokers, seeking cheaper alternatives across state lines or in illegal markets. If that pattern holds, Illinois’ new vape tax revenue could vanish just as quickly as it appeared.
That also threatens legitimate businesses, particularly small vape shops. Analysis from John Dunham and Associates showed if the federal government imposed a 2.78 cent per milligram of nicotine tax on vape products in 2021, there would have been a loss of as many as 42,800 jobs and almost 10,000 independent, adult-only vapor shops would have closed.
Rather than plugging budget holes with unpredictable and economically harmful tax hikes, Illinois needs structural changes to achieve long-term stability. This includes implementing spending caps linked to the state’s economic growth, right-sizing government health care costs, cutting administrative bloat and overhauling the state’s broken pension system through constitutional reform.
Illinois doesn’t have a revenue problem: it has a spending problem. Unless state leaders control costs and pursue reform, Illinois will continue to trade away stability for short-term fixes at the expense of workers, businesses and taxpayers.