When Democrat Gov. Pat Quinn and the Illinois Legislature wanted some extra cash to pay for a massive $31 billion infrastructure spending bill, who did they turn to for help? The Streamlined Sales Tax Project.
Last month, Gov. Quinn signed House Bill 255 into law, which expressly raises taxes on distilled spirits, wine, and beer. However, the bill also went after two of the newest targets of tax-and-spend legislators: candy and soft drinks.
Illinois’s statewide sales tax is 6.25 percent and ranges all the way to 10.25 percent in Chicago (one of the highest in the nation), but groceries are taxed at only 1 percent to keep the cost of food low. So, under the guise of promoting public health – and with the sole intent of raising taxes – the Illinois legislature’s bill redefined and excluded candy and soft drinks from the definition of groceries and began taxing them at the higher 6.25 percent-plus tax rate.
The source of these new definitions of “candy” and “soft drinks” is the Streamlined Sales Tax Project (SSTP), a cartel of state policymakers that advocate for a simpler tax code, but in reality provide cover for raising taxes and often make the tax code even more confusing. SSTP’s board creates definitions for various goods and states adopt these definitions to purportedly “streamline” tax codes between states. While Illinois is not a member of SSTP, HB 255 directly adopted the SSTP definition for both “candy” and “soft drinks.”
First, the new SSTP definition of candy makes things more complicated for both storeowners and consumers. The Chicago Tribune provides some examples:
Hershey’s bar? Candy for sure. But the Cookies ‘n’ Cream spinoff? That’s food, not candy…A Butterfinger? Candy. Butterfinger Stixx with wafer center? Not candy. Likewise, Twix, Kit Kat and Twizzlers are all candy-aisle staples that Illinois no longer considers to be candy.
Another great example from Mike Wynne, the former general counsel of the Illinois Department of Revenue: If you put yogurt on a piece of fruit it becomes candy, but if you put yogurt on a pretzel, it’s food. Sounds a lot more simple, doesn’t it?
Second, not only does the SSTP definition of candy make the tax code more confusing and less simple, it provides cover for legislators who want to target candy or soft drinks for more revenue. States that are members of SSTP are required to adopt the group’s definitions for various goods. However, the SSTP definition of “food and food ingredients” clearly states:
A member state may exclude “candy,” “dietary supplements” and “soft drinks” from this definition.
It doesn’t take a state-focused taxpayer advocate to figure out why these exceptions exist. The popularity amongst tax hiking lawmakers of so-called "snack taxes" and taxes on soft drinks has grown enormously in recent years.
Sure the Streamlined Sales Tax Project’s Governing Board decries taxpayer groups and argues SSTP does not call for tax increases, but it’s frankly not hard to see where their intent truly lies. Americans for Tax Reform strongly supports the goal of simplifying the tax code, however reform should always be done in a revenue neutral way that does not raise taxes – a goal SSTP outwardly does not accomplish.
For more information on SSTP, click here for ATR’s Policy Brief on eTaxes. Also, click here and here for ATR’s letters opposing HB 255 in Illinois.
(Photo by Amarand Agasi)