[First published at Crain's Chicago.]
This is no way to solve budget problems caused by years of reckless spending.
Cook County Board President Toni Preckwinkle proposes a $25 tax on every gun sold, a higher tax on cigarettes to reduce smoking and a tax on major purchases that residents and businesses make outside the county to keep those purchases inside the county.
Wow, and civics teachers tell students that taxes are collected to fund government. Apparently they need to revise their lessons. As leader of the second-largest county government in the nation, Ms. Preckwinkle has made clear she believes taxes also are collected to serve as symbols of futility and coercion.
She made no apology for proposing to raise the county cigarette tax $1 a pack: “(T)he higher we increase our cigarette prices the more we discourage particularly young people from smoking and save (ourselves) the cost of treating people who are addicted to tobacco and nicotine for the rest of their lives,” she told the Chicago Tribune.
In 2006, Chicago raised its cigarette tax, and this year the city estimates $18.7 million in cigarette tax revenue, compared with $32.9 million before the tax hike. More smokers are buying cigarettes on the black market or outside the city. A higher county tax would drive more buyers to the black market or neighboring counties or states.
Ms. Preckwinkle suggests that higher cigarette taxes will prevent young people from smoking. But it’s already against the law for young people to smoke. While it’s an economic truth that high taxes on any product discourage demand, this is true only to a point on items for which there is no good substitute. Even when such products are outlawed, some people continue to look for ways to get them.
This is why Prohibition was a monumental failure. This is why the drug war has been a monumental failure. It’s why black markets for tobacco, narcotics and other highly taxed and banned substances thrive. Some people do things they know are harmful, dangerous and even deadly, despite high taxes and harsh punishments imposed by government.
Ms. Preckwinkle also proposes a 1.25 percent tax on out-of-county purchases of non-titled property that total $3,500 a year or more if the property is to be used inside the county. She argues that this would keep more sales in the county.
A better way to keep sales in the county would be to continue lowering the sales tax and other local taxes. This would expand the tax base and boost local businesses by making the county more attractive overall.
Neighboring counties do well with lower taxes and spending. Cook County government lacks only the will to do the same. Imposing coercive and futile taxes won’t solve that problem.