- An Illinois judge put implementation of a sugary beverage tax in Cook County, which includes Chicago, on hold until at least July 12, when another hearing will take place, according to the Chicago Tribune. The penny-per-ounce tax, was initially scheduled to take effect on July 1, was challenged in court by the Illinois Retail Merchants Association and several grocers. A court hearing about the case took place on Thursday.
- Opponents claim the tax is unconstitutionally vague. It would 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. "We’re asking for a temporary restraining order to delay the harm our clients, the consumers and distributors will face if this tax is implemented on Saturday,” retailers' attorney David Ruskin argued at Thursday's court hearing on the issue, according to the Chicago Sun-Times.
- The county is expecting the tax to bring in $17 million a month. The proceeds will be spent on county services to benefit public health. “The validity of a tax doesn’t have to do with the effect it has on a person,” James Beligratis, attorney with Cook County, told the Sun-Times. “The county board is trying to make reasonable distinctions (between what’s taxed and what’s not).”
Soda taxes are always controversial, even though they seem to be getting more traction nationwide. There are currently soda taxes 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. One of the few initiatives not to pass occurred in May when Santa Fe voters rejected a 2-cents-per-ounce tax on the distributors of sugar-sweetened beverages.
Cook County's tax was approved in November by county commissioners, with a tie broken by a vote from the board president. At the time, she said revenue the tax would bring was important and would put the county on a "stable financial footing for the next three years, during which we will not have to approve any additional tax increases."
This tax has been decried by consumer and retail groups because of its outsized financial impact on the industry. According to the Illinois Policy Network, the way the tax is assessed — coupled with Chicago's 10.25% sales tax and already existing 3% nonalcoholic beverages tax — would increase the cost of a 12-pack of soda to nearly $6 from $4.
Retailers and consumers in Philadelphia have had similar complaints, but the law — taxing sugar-sweetened beverages at 1.5 cents per ounce — has not budged. While consumers are finding much higher prices when they shop, the purchase of sugary beverages has gone down. This has led to chaos among retailers and soda distributors. Soon after the tax took effect, some Philadelphia retailers saw sales drop up to 50%. PepsiCo has announced it is laying off 80 to 100 employees at its Philadelphia distribution plant because of the tax.
Where they've been imposed, soda taxes have a good record of reducing consumption. A study looking at Berkeley's tax, which went into effect in March 2015, saw sales decline about 9.6%. If that is the goal, and the Chicago tax is able to stand, it is likely to be successful.
However, if the Chicago tax does go into effect, the metro area also may see some of the other negative effects reported in other areas: Issues at grocery stores, potential layoffs, and possibly disappointing tax revenues coming into government coffers.