Illinois counts on bad habits to raise $3.47B in sin taxes

Whether your vice is drinking, tobacco, cannabis or gambling, Illinois is enjoying $3.47 billion from taxing it.

The holidays are often when people overindulge and make resolutions for doing better in the New Year, but Illinois lawmakers will be happy to see bad habits continue in 2026 because it helps them enjoy their vice: overspending.

Illinois piles extra taxes onto behaviors politicians like to label as “vices,” including alcohol, tobacco, cannabis and gambling. If residents want to indulge, the state is ready to take a cut: $3.47 billion in the fiscal year that ended June 30.

Of that $3.47 billion for the state budget, the biggest share comes from the Illinois Lottery with $789 million. The state counts on Illinoisans’ bad habits to fill budget holes created by state leaders’ lack of fiscal self-control.

Publicly, lawmakers often claim these taxes exist to reduce harmful behavior. In practice, the budget depends on people continuing to smoke, drink and gamble. If fewer residents participated, the revenue would disappear. That contradiction makes it difficult for politicians to celebrate both discouraging vice and collecting more money from it.

Another criticism of such taxes is they are regressive, meaning they tend to impact low-income residents disproportionately. They are also unreliable revenue sources, as a study of cigarette taxes showed.

The state’s appetite for spending keeps growing. The current budget tops $55 billion, and lawmakers added billions more compared with prior years. To help support that growth, Gov. J.B. Pritzker and legislators increased the tax on sports wagering, a move that targets gaming companies but ultimately depends on people losing more bets.

There have also been pushes in Springfield to expand gambling even farther by legalizing online casino games. That would allow Illinoisans to gamble anytime, anywhere, without stepping into a casino or waiting for a drawing – giving the state another opportunity to profit from round-the-clock access to betting.

For lawmakers, sin taxes aren’t about altruistic encouragement of moderation. They’re about revenue.