Father of Chicago’s bottled water tax, Alderman George Cardenas, introduced a resolution to raise the tax on sugary drinks at a February 25, 2012 City Council meeting. According to reports, the tax increase could range from 15 to 35 cents per beverage to a penny per ounce. Americans for Tax Reform opposes Cardenas’s proposal as a misguided attempt to siphon more money from the private economy and heavily taxed Chicagoans under the phony auspices of improved health.
It is unlikely a soda tax will have any effect on mitigating obesity, as soda taxes do not necessarily decrease an individual’s caloric intake. According to a recent study by the Tax Foundation, consumers will likely substitute other food and drink to make up for the discrepancy in their diet when they discontinue soda consumption in response to higher prices. Thus, decreased soda consumption does not mean trimmer waistlines in Chicago.
Soda taxes have already proved to be ineffective policy. As such, Washington and Maine recently repealed failed taxes on soda. When it comes to the claim that a soda tax will improve public health, Cardenas’s proposal is bereft of empirical support.
Singling out soda, when many factors contribute to obesity, is an ill-advised use of government force that needlessly restricts citizens’ freedom of choice. A city-wide soda tax would fall on all Chicagoans, not just those who consume in excess. Perfectly healthy individuals who enjoy soda and other sweetened drinks should not have to incur higher prices from a nanny-state seeking to curb consumption.
In fact, Chicago should look to its own experience with other coercive lifestyle taxes as a cautionary tale. In July 2007, Chicago had a combined state and local cigarette tax rate of $3.66 per pack, while nearby Indiana had a 55.5 cent state levy and no local taxes. Given the tax differential between Chicago and neighboring locales, it is no surprise that Chicagoans flocked to neighboring Indiana to make their purchases. David Merriman, professor at the University of Illinois at Chicago’s Institute of Government and Public Affairs, conducted a study using a random sample of discarded cigarette packs to prove the prevalence of tax avoidance in Chicago. According to the study, 75 percent of the littered packs displayed no city tax stamp, indicating that they were purchased outside the city.
Cardenas’s proposed soda tax will hurt Chicago businesses and reduce their job creating capacity, particularly employers that manufacture, distribute, and sell soda and other sweetened beverages, as shoppers travel outside the city to purchase beverages. History has shown that consumers are not deterred by a short drive to evade onerous and exorbitant taxes.
Furthermore, another tax increase is the last thing individuals, families, and employers in the Windy City need. Chicago has already been hit with a wave of tax increases over the past year. Gov. Quinn signed a whopping 67% income tax increase into law last year and raised the corporate rate by 46%, taking a total of $7 billion out of the private economy. Cardenas’s soda tax would also come on the heels of Cook County’s 2011 alcohol and tobacco tax increases that were passed just last November. These included a 50% hike in alcohol taxes and an expansion of the cigarette tax to other tobacco products, such as smokeless tobacco, roll-your-own, and cigars. Adding insult to taxpayer injury, in less than 10 months the largest federal tax hike in history will hit the Chicago economy. Chicagoans simply cannot afford more job-killing tax increases at the local level.
Americans for Tax Reform urges Chicago taxpayers to reject Alderman Cardenas’s misguided soda tax hike and encourages his fellow City Councilmen to do the same. Chicago taxpayers should contact Alderman Cardenas at 773-523-8250 and urge him to withdraw this unnecessary tax increase.