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Quinn Signs Bill Raising Cigarette Taxes To Fund Medicaid

UPDATED 06/14/12 9:07 a.m.

CHICAGO (CBS) -- Gov. Pat Quinn has signed a bill to help the state's struggling Medicaid program, but critics are convinced the budget solution will do more harm than good.

As CBS 2's Susanna Song reports, Quinn signed the bill Thursday morning in order to keep the Medicaid program alive and maintain the ability to finance it. And under the bill, health care coverage for the poor still has been slashed.

Illinois State Senate Assistant Majority Leader Jeff Schoenberg (D-Evanston) praised Quinn's decision to sign the bill into law.

"We know that the price of a pack of cigarettes is one of the most influential factors in a person's decision whether or not to start smoking or continue to smoke, especially if they are younger," Schoenberg said in a news release. "The law signed today will not only generate more resources to provide quality healthcare, but will also save money on treating tobacco-related illnesses."

Some smokers who are used to coming to the local convenience store to buy a pack of cigarettes will realize it costs $1 more, just in taxes. And largely because of taxes on the city, county and state level, the cost of a pack of cigarettes already exceeds $10 in many parts of Chicago as it is.

The cigarette tax hike is expected to generate about $350 million.

The federal government will match that revenue, producing $700 million in to total for the struggling Medicaid program.

The measure also changes hospital assessments statewide, which will bring in $50 million dollars, which the feds would also match.

But in spite of the extra funds, the state will still have to slash healthcare coverage for the poor by $1.6 billion dollars.

Under the measure, hundreds of thousands of poor Illinoisans will lose health coverage, and a prescription drug discount program for seniors will be eliminated.

Quinn says he signed off on the cigarette tax hike to prevent cuts from going deeper. He also hopes it will encourage people to stop smoking or never start.

Opponents though believe smokers will cross state lines to buy cigarettes.

On Thursday morning, smokers disagreed on whether raising taxes on cigarettes was the right move, but said the tax hike wouldn't motivate them to quit smoking.

"I think it's kind of unfair; the price is already… about $8 to $9," said James Orozco, adding that "probably about a dollar, almost" of that is taxes.

"It's already almost $10 and now it's like $11," the man continued, but he quick to say the tax hike would not stop him from smoking.

Another man, Will Pelanken, said he was glad the tax hike was going to a good cause.

"I figure we have little say over what the government decides to tax. It's just knowing that tax money is going to good cause; something that directly correlates and affects us – Medicaid – it makes it a little more acceptable, I suppose.

But Pelanken also said, "Absolutely not," when asked if the tax hike would stop him from smoking.

Meanwhile, WBBM Newsradio's Lisa Fielding reported earlier this week that some smokers have been anticipating the tax hike and have been stocking up.

"Some of the consumers are trying to get a little bit ahead, and maybe buy about two cartons of cigarettes a week," Bill Fleischli, executive vice president of the Illinois Association of Convenience Stores, said earlier this week. "They might buy three or four."

Fleischli fears the new tax will force smokers to go elsewhere – to Wisconsin, Indiana and even Missouri – to get cheaper cigarettes.

Furthermore, the plan does not just hike taxes on cigarettes - but on other tobacco products as well, like pipe tobacco and cigars.

Late last month, Chuck Levi, owner of Iwan Ries and Company – a tobacconist on Wabash Avenue – said late last month that he is afraid that, because of the higher tax, he would lose some business to online sales.

"It will certainly affect us to the point where we'll have to probably lay off some employees. Either that or cut our prices, which will cut our margins, obviously - and affect us a lot," he said.

Levi noted the higher state tax would come on top of a new Cook County tax on pipe tobacco and cigars.

The tax hikes and cuts will go into effect July 1.

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