Cigarette Taxes in a Big Brother State

In tough economic times the government often turn to taxing the nonessential goods, and this is certainly turn in our neighboring state Illinois. Recently an article appeared in the Chicago Tribune addressing one of the effects of this tax, people taking steps to avoid it. The current estimate states that the city of Chicago alone loses around 120 million dollars a year in untaxed cigarette money. The cause of this is people counterfeiting stamps, buying across state borders, or simply not buying stamps.

At root of this issue is a conflict between the market and the government sector on control. The tobacco industry is being limited by the massive tax imposed on its product. However this policy is allowed because of the idea of sin tax and government social intervention. The extremity of the nature of this tax can be seen in with comparison. The tax on cigarettes in Indiana adds about a dollar to the price of a pack, while in Illinois the tax adds on about 3.66$. A possible "solution" to this that is being tested involves an electronic id on the stamps, but the main problem so far has been the cost of the technology required for this to be effective. It will be intresting in the coming years to see whether or not the politcians realize that if they didn't place massive taxes on the cigarettes in the first place, they wouldn't have to spend so much money to make sure people pay.