The plan also calls for the state’s flat income tax to be eliminated in favor of a tiered structure.
Many of these tax hikes will simply fuel the state government’s addiction to spending beyond their means. One of the more nonsensical increases would be to single out purchases of beer, wine and spirits. As part of the plan, tax rates for beer would rise by 20 percent; the per-gallon tax on both wine and spirits would increase by nearly 50 percent.
While excise taxes are first applied to alcohol producers, the financial burden inevitably rolls downhill and affects the restaurants and bars that sell the product, as well as the consumers who purchase it. In practice, this means the price of alcohol will rise — another new cost that is estimated to place an additional $120 million financial burden on consumers.
This tax hike is regressive; or in other words, has a bigger effect on those who make less money because a larger proportion of their income goes to the government. While the proposal may be framed as a strategy to collect funds to benefit all Illinoisans, it’s clear the least fortunate will bear the brunt of the consequences.
Illinois alcohol taxes are already among the highest in the Midwest. When taking into account taxes at all levels of government, roughly one-third of the price of every drink sold is due to taxes.
If adopted, the hikes will counteract recent progress made at the federal level. As part of the 2017 Tax Cuts and Jobs Act, federal alcohol excise tax rates dropped for all alcohol products. The estimated $4.2 billion has been funneled into business expansion and job creation at vineyards, distilleries and breweries across the country. It’s also contributed to the strong economy the U.S. has experienced over the past two years.
Pritzker’s proposal would push the state’s alcohol producers and affiliated businesses—including restaurants, bars and other entertainment venues—in the opposite direction. To the degree a business absorbs part of the new tax, there will be less investment in new employment opportunities, facility upgrades and improvements to the customer experience. All while consumers are encouraged to purchase fewer products.
The move will also spur more cross-border purchases. It’s estimated that Illinois already loses out on $8 million in beer sales alone from residents hopping across the border for cheaper prices — a flow that will only swell with higher tax rates.
The broader high-tax environment is encouraging many Illinoisans to pack up and leave the state. Illinois has experienced a decline in population every year beginning in 2014. And in 2018, the only state to lose more residents than Illinois was New York. If the goal is to raise revenue, encouraging consumers to leave the state isn’t the best strategy.
Illinois undoubtedly has a budget problem, but shaking down restaurants, bars and responsible consumers for more tax dollars to help fill the financial gap is not the solution. Perhaps state lawmakers should discuss alternative strategies over a glass of their favorite beer, wine or spirit. Before the price spikes.
Jackson Shedelbower is the communications director of the American Beverage Institute.