Tag: Cigarette Taxes

Cook County’s New Business Killers, a/k/a Taxes

Cook County Board President Toni Preckwinkle’s proposed budget calls for a 1.25 percent tax on businesses that buy “non-titled” items like office supplies, equipment, building materials and even artwork from outside the county’s borders.  …

County businesses would be allowed to purchase these goods up to $2,500 without any penalty, county officials said. The businesses are responsible for self-reporting the purchases to the county’s revenue department. A Preckwinkle spokesman said the county expects most businesses will comply.  …

The tax is among several initiatives Preckwinkle announced Thursday during a budget presentation, which also called for an additional $1 tax per pack on cigarettes, a 5-cent tax on bullets and an additional $25 tax on gun purchases.

“We’re proposing (these taxes) to subsidize health care,” Preckwinkle said. “Cigarette smoking is the No. 1 cause of preventable disease and gun violence is incredibly expensive.”

The cigarette tax is expected to generate $25.6 million additional revenue in the coming year, and the taxes on guns and bullets are anticipated to bring the county an extra $1 million over the course of 2013.

via Daily Herald.

Shear insanity.  There are so many problems here it’s hard to know where to begin.

As to the increase in the cigarette tax… this is a proven loser.  In 2006 the county earned over $200 million annually from cigarette taxes.  Then they doubled the tax.  Revenue fell to around $131 million.  Now she wants to raise the tax again… that’s the worst thing you can do.  If you want more revenue from cigarettes you need to LOWER the tax rate, not raise it.  The problem here is that Preckwinkle, like all Democrats, do not understand or even believe in the Laffer Curve.  They’re honestly just dumb that way.

How about this tax on bullets?  Well I currently buy a box of 100 rounds out at the Wal-Mart in Villa Park for about $30 + sales tax, or around $33.  Now Preckwinkle wants to add $5 to that box.  Guess what Toni?  I will NOT be buying my ammo in Cook County anymore.  So you’re not going to raise $5 from me… you’re going to lose the $3 in sales tax.  Your “bullet tax” is going to cost the County money…. Lots of money.  Like the cigarette tax, this idea is a net loser.  You know what else, you won’t even be able to claim that I “use” the product (in this case bullets) in Cook County b/c pretty soon all the shooting ranges in the county will go out of business.  So I’ll go shoot in Indiana.  That will be more tax revenue lost.

Lastly, what is up with this office supply tax?  Preckwinkle actually has the stones to call this tax “pro-business” thinking that people will simply comply and buy all there stuff from within the county.  That’s laughable.  She’s such a fool.  How about this Toni; ya think that someone might just open their business in Will, DuPage, or Lake county instead of Cook County?  Guess what Toni, you just made all the office buildings on the North side of Lake Cook road more valuable than the ones on the South side.  Same goes for 191st Street on the south.  You’re now creating another incentive for people to (a) open their businesses outside the county, and (b) move their businesses outside the county.  This tax will cost many many times more than whatever revenue it brings in.

Cook County needs new leadership or it’s going to die.

 

Rahm: Higher Cigarette & Amusement Taxes

Mayor Rahm Emanuel is considering an increase in city taxes on cigarettes and entertainment to help close an anticipated $369 million gap in next year’s budget, City Hall sources said Wednesday.  …

It’s unclear how much the cigarette tax might be raised. A city tobacco tax increase would come on the heels of a $1-a-pack state hike that took effect July 1. The city last increased its cigarette tax by 20 cents — to 68 cents a pack — in 2006.

Taxes on a pack of cigarettes in Chicago total $5.67, the second-highest per-pack tax in the nation, behind New York City’s $5.85 a pack. The city expects to bring in $18.7 million in cigarette taxes this year, compared with $32.9 million just six years ago, according to city financial records.

via Chicago Tribune.

Cook County has already proven that when you raise cigarette taxes you lose revenue.  The city’s own numbers are another example of that.

Does Rahm have any plan to cut ANY spending?  Anything other than police officers?

Why don’t we shut down the TIFs?  Take fund necessary to pay off the bonds and do so; take the rest of the funds and return them to the general fund.  That would be quick and easy.

Enough with the !@#$^ taxes.

One Word for CPS Teachers: Save

Save.

Save as much money as you can.

Live well below your means.

The pension time-bomb is coming.

One of the most vexing problems for Chicago and its teachers went virtually unmentioned during the strike: The pension fund is about to hit a wall.

The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.

via NYTimes.com.

and;

“Each day we wait to enact comprehensive pension reform, the problem gets worse,” Quinn said in a statement. “The unfunded liability will grow to more than $92 billion by the end of next fiscal year. Illinois is currently on track to spend more on pensions than education by 2016 and that is unacceptable.
— Pat Quinn

via Des Plaines, IL Patch.

If you think that taxpayers are going to fund your pensions, forget-about it.

If you think you can tax the rich to fund your pensions, forget-about it.

If you think that people are going to move into a community where their property taxes increase by 7% every year in order to fund failing schools, forget-about it.

If you think you’re going to get your COLA every year, forget-about it.

You have two options:  Save every nickel and dime you can, or plan to work until you’re in your 70’s.

Consider:

Illinois has an unfunded pension liability of at least $83 billion, according to state figures. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states, data compiled by Bloomberg show.  …

Illinois had about $28 billion of general-obligation debt as of May 8, according to bond documents. The state of about 13 million people plans to sell $50 million of debt next month for technology projects, John Sinsheimer, the state’s director of capital markets, said in an interview.

via Businessweek.

Further:

Illinois’s backlog of unpaid bills has risen to more than $9 billion because of pension costs and falling federal aid, leaving the state “essentially treading water,” Comptroller Judy Baar Topinka said.

via Bloomberg.

$83B + $28B + $9B = $120,000,000,000 in debt.  The extra $50 million at 0.42% of the total is a rounding error.  It should also be noted that this does not include the City of Chicago (or any other municipality or county debt) which is another $12-16 billion in debt depending on who you ask.

12,869,257 people in the state of Illinois.  Every man, woman, and child owed owes $9,324.54 to the state.  If you live in Chicago you owe another 5,910.34 locally for total of $15,234.89.  (Are you feeling good about your new contract yet?)

I was just looking over the FY2013 Illinois State Budget as prepared by Gov. Quinn.  On Pg 37 we’re told that Debt Service is 5.42% of all outlays.  That’s over $3.3B per year paying principle and interest on money we borrowed.  That’s $3.3B per year we could use to hire police officers, or teachers, or fully fund the pension funds but will instead go to pay for our bad fiscal decisions of the past.

More importantly, total expenditures are $61.0B.  That means that if we (a/k/a the State of Illinois) completely stopped operating, fired all the employees, shuttered all the buildings, and spend 100% of the budget on paying off debt we’d be debt free in 2 years.

Oh, I know what you’re going to say… You’re going to tell me all about how the Chicago Teachers’ Pension Fund is not as underwater as the general state fund.  True, but it’s still broke and broken.  And there’s no money to fix it.

Then you’re going to say that this is a right guaranteed by the Illinois Constitution.  Oh ya?  Well where’s the money going to come from?  The rich?  You wish:

When New Jersey governor Chris Christie heard British Prime Minister David Cameron invite France’s wealthy to decamp to England to escape a proposed 75% tax rate, he felt something akin to déjà vu. Every day top executives of Johnson & Johnson (JNJ), Merck (MRK), and other companies commute from their homes in Pennsylvania to offices in Christie’s state, saving roughly two-thirds on their state income tax bill — and costing New Jersey’s treasury $50 million, by one estimate.

via Fortune (a/k/a CNN).

You don’t understand the Laffer Curve.

The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a “millionaire’s tax” pushed through by Gov. Martin O’Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

via CNBC.

You’re confused how a state and raise taxes and lose revenue.  It happens all the time.  I wrote a piece about cigarette taxes in Cook County; raised taxes, lost revenue.

The more you tax something the less of it you get.

You tax income, you get less income.  You tax babies, you get less babies.

Even the left-loving Bono (of U2 fame) moves his wealth around to avoid taxes.

In Illinois, if we quadrupled the state income tax on those with adjusted gross income over $500k it would take over 13 years just to get current state pension liabilities square.  This would not cover the additional debt of Chicago Teachers, Chicago Police & Fire, or any of the billions and billions of general debt.

So take your 16% raise and start saving.  Save like your life depends on it.  Because it does.

Gotta Love American Ingenuity (& Tax Avoidance)

So I’m reading two stories (here and here) about a new law that will effectively outlaw Roll-Your-Own tobacco stores.  It’s something I kinda follow because I always thought it was a decent business model (until the government outlaws your business) and another fine example of what steps people will go through to avoid taxes.

In short:

A tiny amendment buried in the federal transportation bill to be signed today by President Barack Obama will put operators of roll-your-own cigarette operations in Las Vegas and nationwide out of business at midnight.  …

The machines are used by customers who buy loose tobacco and paper tubes from the shop and then turn out a carton of finished cigarettes in as little as 10 minutes, often varying the blend to suit their taste. Savings are substantial – at $23 per carton, half the cost of a name-brand smoke – in part because loose tobacco is taxed at a lower rate.

via ReviewJournal.com.

And I was thinking about how sad this was for all the people who work in this industry: the store owners, their employees, the folks who manufacture the RYO machines, their families, the companies who make the cigarette tubes, and the loose pipe tobacco makers, and all of the folks who work in packaging all of these things.

And then… in the comment section of the Law Vegas article I read this:

James Fliess Jul. 6, 2012 | 2:47 p.m.

Just a thought. My understanding, and maybe I’m wrong, is that cigarettes manufactured by these machines must cost (via taxes) as much as other cigarettes. How about this arrangement. The store sells the tobacco and supplies as they always have, but they do not have a rolling machine. A buisness next door does not sell tobacco or supplies, but it rents time on their rolling machine. Does it work?

Kudos to you Mr. James Fliess!!