Illinois’ Tax Is Missouri’s Gain

On Sept. 1, Illinois will significantly raise taxes on alcohol, a diktat that will hurt Illinois businesses while benefiting bordering stores in Missouri. From the Post-Dispatch:

Under the new structure, the tax on a gallon of beer would rise from the current 18.5 cents per gallon to 23.1 cents, which could add about a nickel to the price of a six-pack.

The hike for other drinks, though, will be higher. The tax on wine will jump from 73 cents per gallon to $1.39, adding more than a dime to the cost of a typical bottle. And distilled spirits will jump from $4.50 per gallon to $8.55, a 90-percent tax increase.

Missouri’s alcohol taxes already were lower than those in Illinois. Missouri taxes its beer at 6 cents per gallon, wine at 42 cents and spirits at $2.

Illinois officials plan to use the added revenue to fund a series of infrastructure projects. They will find, though, that passing such a large tax hike will not result in reaping the amount of revenue that they anticipate, as some potentially large marginal number of people move their activities elsewhere. The Illinois tax hike, combined with Missouri’s lower gas taxes, will cause businesses on the east side of the state border to see a stark decrease in sales as Illinoisans flock to Missouri to purchase gas and alcohol — as well as other items, like cigarettes and food, which will further augment Missouri’s tax revenue at the expense of Illinois.

A $6.55-per-gallon price difference for liquor is significant, and the availability of cheaper alternatives across the state line means that the tax hike is less likely to lead to a decrease in alcohol consumption than simply to provide Illinois residents with an incentive to stock up during their trips across the border.

At any rate, decreased sales in Illinois will benefit Missourians as the Show-Me State’s coffers capture Prairie State dollars.