Thursday, September 3, 2009

Chocoholics, Alcoholics & Hygiene Enthusiasts Unite!

Chocoholics, Alcoholics and Hygiene Enthusiasts unite against Governor Quinn's obscene tax increase on items as basic as shampoo, tooth paste, beer and candy! These highly regressive taxes will be especially felt by residents of Chicago who already face crushing city and county taxes. And of course this will further cement Illinois's exodus of businesses and the jobs and revenue that they create.

Stock up: Illinois Sales Taxes on Grooming Products, Candy and Alcohol Going up Tuesday

August 31, 2009

Today is a good day to schedule a shopping trip to Wal-Mart. Or Target. Or any local convenience store, for that matter.

Why? Illinois taxes on everyday items like shampoo, candy, and alcohol are going up Tuesday, September 1. Now is a good time to stock up on Pantene, peanut butter cups and pinot grigio.

Earlier this year, the Illinois general assembly approved a series of revenue increases to help pay for a $31 billion capital spending program. Illinois Governor Pat Quinn signed the public works deal into law in July.

Here’s a rundown of how your shopping list could be impacted.

Starting Tuesday, soft drinks and candy will be taxed at the 6.25 state sales tax rate (plus any local tax add-ons). Until now, they fell under the 1 percent food sales tax. Soda, flavored water, sports drinks, gum, breath mints, and chocolate bars are some of the items that will be hit with higher taxes

Alcohol excise taxes are in line for a hike as well, even though Illinois’s rates are already high for the region. The excise tax on a gallon of beer is now 23 cents, up 24 percent from 18.5 cents a gallon. A gallon of wine will now be taxed at $1.39, up 90 percent from $0.73. The new tax on a gallon of spirits is $8.55, up 90 percent from $4.50. That’s equal to a 2.6-cent increase on a six-pack of beer, a 13-cent increase on a bottle of wine, and an 81-cent increase on a fifth of liquor.

Personal grooming items like shampoo, deodorant, and toothpaste have traditionally been taxed under a 1 percent medication sales tax. They’ll now be taxed at the 6.25 state sales tax rate (local add-ons apply here, as well).

Consumers won’t be the only ones feeling the pain from higher taxes – producers of the targeted products are also concerned. The Distilled Spirits Council of the United States estimates that the alcohol tax hikes will cause Illinois to lose $225 million in retail sales and 4,500 hospitality sector jobs statewide.

“People react to higher prices. These tax increases are going to put Illinois retailers at a huge competitive disadvantage vis-à-vis surrounding states,” notes David Ozgo, chief economist with the Distilled Spirits Council. “In nearby Indiana spirits are taxed at only $2.68 per gallon.”

“It’s even worse when you throw in the fact that unlike most localities, both Cook County and Chicago have their own separate taxes on spirits. It will come to $13.23 a gallon, which is highest rate of any major metropolitan city outside of states with a government monopoly on alcohol.

Rockwell Wirtz, president of a large beer, wine, and spirits distributor company, filed a lawsuit in the Cook County Circuit Court arguing that the capital plan was unconstitutional because the sweeping bill violated the “single subject” legislative requirement. The suit also focuses on the disproportionately higher tax increases on wine and hard liquor as compared to beer. An initial hearing is scheduled for Tuesday, September 1.

Beyond lawsuits, what other recourse options do consumers have?

“Illinoisans can always contact their state legislators to let them know that they’re tired of paying these taxes, they’re tired of being discriminated against,” said Ozgo. “There is no public policy reason for singling out beverage alcohol for special taxation.”

If you do make your way to the store on August 31 to stock up, be sure to check out before the stroke of midnight. That’s when Illinois turns into a more expensive place for consumers to shop.
Kristina Rasmussen is the Executive Vice President of the Illinois Policy Institute.

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