CIGARETTE TAX ISSUE IN ILLINOIS WAS CONTROVERSIAL, SAYS LAWMAKERS

ELDORADO, Ill. -- State Rep. David Phelps voted for the 14-cent-a-pack cigarette tax increase that will replace the "granny" tax measure in Illinois.

Sen. Jim Rea voted nay.

The cigarette tax was a key step as the Illinois General Assembly narrowly voted last week to support health care for the poor.

Under the measure, cigarette taxes will climb from 30 cents to 44 cents a pack and other tobacco products pipe tobacco and cigars will be hit with a new 20 percent tax.

Raising tobacco taxes was the most controversial element of the end-of-the-session agreements that were reached by legislative leaders 13 days into an overtime session. The session ended with the adoption of a $30 billion state budget Tuesday.

Phelps, D-Eldorado, in voting for the cigarette tax, said he had a choice between nursing homes and cigarettes. "That choice was easy," he said. "However, it was a tough decision, and I would have preferred some alternate tax. But at this stage in the session, it was a temporary solution for some permanent problems we'll be facing in the future."

Rea, in explaining his no vote, said his primary concern was that it would hurt the small "mom-and-pop" businesses. "These businesses will be hurt by the tax increase and we will lose jobs as citizens cross state lines to buy cigarettes. I am disappointed that we could not find another means of revenue to replace the granny tax."

Phelps said the tax squeaked through because it helps replace an even more unpopular levy, the $6.30-a-day granny tax. This tax applied to only 40,000 or so people, but its impact extends nursing home walls to relatives and aging people with nursing homes in their futures.

Phelps, who expects to take some flak because of the potential effect on businesses that sell cigarettes, said, "The sacrifice was small compared to what we gained."

He said some Southern Illinois nursing homes and hospitals would have gone out of business without passage of the granny tax replacement, which has a separate, non-controversial component for hospitals.

"Some people may be going out of state to purchase cigarettes in the future," said Phelps. "But, without nursing homes and hospitals, a lot more people would have been going out of state for health care."

Phelps, whose district borders Kentucky, which has only a 3-cent cigarette tax, and Missouri, where the cigarette tax is 13 cents a package, said a three-fifths vote was necessary to pass legislation after June 30. Prior to that, a simple majority would have passed the measure.

The cigarette measure passed the Senate by a 38-15 vote and cleared the House by a 72-42 vote. Each vote was barely above the required three-fifths majority.

The cigarette tax was one of the major items resolved in the closing days of the session, said Rea. "This assures the receipt of matching federal dollars for the Medicare services to the poor."

Rea, whose district touches three states Kentucky, Missouri and Indiana said he was strongly opposed to the granny tax as well as the cigarette tax.

"I told my colleagues that there were other revenue sources to replace the granny tax," he said. "And some of the alternates would be less harmful to the economic well-being of Southern Illinois. We all know that some Southern Illinoisans are currently crossing state lines and buying cigarettes by the carton. I think this 14-cent increase will result in Illinois citizens buying cigarettes by the case.

"Some of these citizens will spend food for clothing, gasoline, and other merchandise in other states," said Rea. "We may be ensuring that we will not lose federal tax dollars, but the money we gain we will lose through lost sales tax revenue."

Meanwhile, Gov. Jim Edgar, who supported the cigarette tax measure, played down fears that the taxes would hurt Illinois businesses.

"I don't think we're going to lose that many jobs," he said during a budget news conference. "I don't think we're going to see the collapse of the small businessman."

The Republican governor signed the budget, which also includes a 9 percent permanent increase in the state's income tax, into law Wednesday.

During the signing of the budget package, Edgar proclaimed the income tax increase as the fulfillment of a 1990 campaign pledge. As for the state's new spending plan - implemented two weeks after the old one expired - Edgar said it was a good compromise negotiated by him and legislative leaders, and needed no change.

Edgar told reporters that this is the first time since the new (1970) Constitution has been in effect that a governor has signed outright the budget that's been passed by the General Assembly, with no changes, no reduction vetoes, and no item vetoes.