Several new Illinois tax increases take effect today (July 1), including for gasoline, sports bets, and tobacco and nicotine products. The state is attempting to raise $30 million in new revenue.
The tax on tobacco and nicotine products other than cigarettes, including vapes, pouches, and cigars, will increase to 45% across the board, regardless of the previous tax rate. Tobacco retailers will also see their annual license fee double, going from $75 to $150 per year.
Needing to raise an additional $500 million in revenue to balance its budget, Illinois legislators voted to increase taxes on tobacco, vapes, and sports gambling, and expand taxes on out-of-state income for businesses. The budget saw a 3.9% spending increase to $55.3 billion, with the Democratic majority receiving heavy criticism for providing next to no time for public review of the massive spending plan and other major bills, pushing through a previously unseen 3,000 pages of bills in the final 48 hours, according to ABC News.
The state intends to raise tax rates on any “product that is made from or derived from tobacco,” including cigarettes, chewing tobacco, vaping products and nicotine gum, according to legislators. The tax rate will be raised from 36% of the wholesale price of the products to 45%, according to the legislation, but will not be applied to smoking cessation products, according to the text of the bill.
Car parts manufacturer UGN Inc. signed a $299,000 class settlement in a lawsuit saying it wrongly charged tobacco-using workers an annual $1,152 penalty for health coverage without providing a valid way to avoid the fee.
It appears employees could have avoided the $96 monthly surcharge by completing a smoking cessation program, but the complaint alleged that the company’s health plan information documents did not mention this alternative. In fact, the filing claimed “the various benefits guides provided to participants are ‘silent’ on the topic of smoking cessation programs or the possible reimbursement of the tobacco surcharge.
Filed in October 2024 in the U.S. District Court for the Northern District of Illinois, the lawsuit argued the extra fee violated the federal Employee Retirement Income Security Act (ERISA), whose anti-discrimination provisions preclude any insurer or medical plan from assessing an additional charge based on a “health-status related factor,” which includes tobacco use unless the surcharge is part of a bona fide “wellness program.”
The proposed settlement would benefit 431 people who paid the tobacco surcharge in connection with UGN’s health plan between August 2018 and December 2024 and would amount to an estimated 36% of the workers’ damages.
New Illinois laws that go into effect Jan. 1, will place more restrictions on electronic cigarettes.
One law prohibits the advertising, marketing or promoting of an electronic cigarette in a manner that is likely to cause a person to mistake it for an object that is anything other than what it is, a tobacco product.
State Sen. Julie Morrison, D-Lake Forest, said some e-cigarettes are designed to look like school supplies, like highlighters, erasers and pencil sharpeners.
“This law will prohibit tobacco companies from pulling the wool over the eyes of educators and guardians whose job it is to keep kids safe,” said Morrison.
Elizabeth Hicks with the Consumer Choice Center said the assault on vaping may push some Illinoisans back to regular combustible cigarettes, leaving taxpayers to pick up the tab, according to media reports.
“Taxpayers unfortunately also suffer in addition to consumers,” said Hicks. “The annual Medicaid costs for smoking-related illnesses in Illinois is over $2 billion, which is one of the highest throughout the country.”
Another law prohibits electronic cigarettes purchased by mail, online or through other remote sale methods from being shipped to anyone in the state other than a distributor or retailer.