- The penny-per-ounce sugary beverage tax in Cook County, Illinois will go into effect on Wednesday after a circuit court judge dismissed a lawsuit from the Illinois Retail Merchants Association and ended a temporary restraining order against the tax, according to the Chicago Tribune and the Chicago Sun-Times.
- The retail group had challenged the tax — which was initially set to take effect on July 1 in the county that includes Chicago — for purportedly violating a clause in the state constitution that requires similar items be taxed the same way. In a Friday afternoon ruling, the judge found the tax does not violate the constitution and the county could move forward.
- The case has been fraught with controversy outside of the courtroom. The county, which has been struggling with budgetary issues, had anticipated the tax would generate an additional $67.5 million in revenues this year and $200.6 million in 2018. Since the tax was put on hold, Cook County Board President Toni Preckwinkle sent off 300 layoff notices to county employees.
The crux of the issue behind the Chicago-area sugary beverage tax is by no means resolved by this court ruling. Since the ruling came down on Friday afternoon, the retailers had not yet decided whether they were going to appeal, and the county said nothing about how many employees might get to go back to work once revenues from the tax start pouring in.
However, the ruling does not bode well for soda tax opponents anywhere. The case was filed because the retailers believed the way it was applied was unclear. The tax is to be assessed on fountain drinks and those in sealed containers, but not on drinks prepared at coffee shops or purchased with food stamps. As a result, a store-bought Frappuccino would be taxed, but one made at Starbucks would not.
The Illinois tax was intended as a budgetary move for the county to grow revenues without imposing a more universal tax on property or sales. However, the judge did not ultimately take the county's financial situation or the threat of layoffs into consideration in his ruling. What he found in his ruling was that the tax, approved by the county council in November, was within the county's authority and did not violate the state constitution.
"The court is not charged with evaluating the progressive or regressive nature of this tax, or any tax. ... Rather those determinations rest with economists, the county's elected officials and those who ultimately bear the effect of the tax," Kubasiak wrote.
Soda taxes have been getting more popular as individual cities have started imposing them. Currently, the taxes are being collected in urban areas such as Berkeley, California; Boulder, Colorado; and Philadelphia. There also is a recently passed tax in the pipeline for Seattle. While many of these taxes are subject to fierce fights — both before they become law and after they go into effect — the trend toward passing them does not seem to be slowing down. Only one proposal — a two-cent-per-ounce tax in Santa Fe — has failed recently.
Even though many jurisdictions that pass soda taxes aren't subject to Illinois state law, a ruling like this — that the county can enact a tax that may not be applied in a way that consumers can easily understand — could carry weight in other states that want to make a similar move. Courts may not care if there seem to be contradictions in the enactment. As long as proper protocol is followed in writing and approving the tax, it can be found to be legal.
Whatever happens next is sure to be closely watched by many. Soda taxes have been proven to lower consumption of sugary beverages, with a study on the Berkeley, California tax showing a sales decline of about 9.6%. Anecdotally, Philadephia's soda tax, which went into effect this year, caused some retailers to report a drop of up to 50% in sales. Top executives at big soda makers like Coca-Cola and Dr Pepper Snapple have blasted the taxes for the negative impacts they have on the beverage industry and the retailers who sell their carbonated products.