Madison - St. Clair Record

Monday, August 19, 2019

Illinois residents could face sticker shock over beverage tax proposal

By Christopher Knoll | Jan 17, 2017

SPRINGFIELD – If you think you're already paying too much for sweetened liquid refreshments, hold on to your wallet. If approved by the Illinois General Assembly and signed into law, Senate Bill 9 would sharply raise the price consumers pay for packaged sodas, syrup-based coffee drinks and tea.

Proposed by Democratic Sen. Toi W. Hutchinson of the 40th District, the bill would increase the cost of two-liter sodas by 70 cents, 12-packs of soda by $1.44, and a 12-pack of tea by $2.04. These products already face a levy of a 6.25 percent states sales tax.

Todd Maisch, president of the Illinois Chamber of Commerce, was asked if the bill is being sold as a revenue or a health care bill. He stated that politicians were trying to get the best of both worlds.

Maisch stated that the bill, which is not a standalone piece of legislation but has been attached to the state budget bill, is being sold to taxpayers as a source of money to close the deficit, while to legislators it is portrayed as a law to improve the well-being of Illinois citizens.

Claudia Rodriguez, acting executive director of the Illinois Beverage Association, told the Record, “The proposed Illinois beverage tax is being sold solely as a revenue bill; there is nothing in the bill that links it to health. More importantly, the tax will not raise the revenue projected and will not solve the budget crisis. Revenue estimates do not consider the effect of the existing Cook County beverage tax or sales lost to cross-border purchases.”

Last year Cook County proposed a very similar tax and saw a flight of consumers traveling to DuPage and Lake counties to avoid the tax. Maisch said that residents of Cook County would have to pay the county tax, the state sales tax, and now the Illinois tax on these products if the bill passes.

As an industry, liquid refreshment, tea and juice companies currently employ 114,124 Illinois citizens at more than 50 manufacturing and distribution facilities throughout the state. Wages earned from these businesses generate around $6.2 billion per year and deposit around $21 billion into government coffers.

Critics say the penny-per-ounce tax would, like other such schemes, primarily impact middle-class and lower-income families who have seen property taxes rise to the highest in the nation and also face the very real probability of new taxes on garbage and sewer services. The tax, however, has other ripple effects.

According to the Illinois Beverage Association, the state’s economy, which is still recovering from the recession that began in 2007, the legislation directly targets “(n)early 90,000 jobs in restaurants, grocery stores, convenience stores, movie theaters and (the beverage industry).”

Maisch agreed with the numbers and said the impact on the state would be even worse.

“Illinois is a lead producer of corn syrup, which goes into sodas and other drinks,” he said.

In fact, Archer Daniels Midland Co. (ADM), a world leader in corn-syrup production, has its biggest plant in Decatur and has seen its profits shift from ethanol production for fuel to corn syrup for the food and beverage industry. A new tax could hurt production.

In economic theory, a tax on a product often has the effect of diminishing the product's purchase.

Opponents from across the state are railing against the proposed bill; not only businesses, but consumers, small businesses, unions and even civic organizations.

Consumers in particular may also become incensed over what can be seen as double taxation, as the drinks already face a state sales tax. Rodriguez concurred with Maisch about the very real occurrence of not only double, but sextuple taxation. 

“This is certainly taxes on top of taxes,” Rodriguez said. “With more than five existing state and local taxes, a new state penny-per-ounce tax would impose 68 cents in new taxes on a typical 99-cent two-liter bottle – a 68 percent tax rate. Then state and local sales taxes must be added. In comparison, the state charges two cents in taxes for a 12-ounce beer and will charge 12 cents for a 12-ounce soda if this passes.”

If what occurred in Philadelphia at the beginning of the year is any indication, retailers will also become rankled over the treatment they will receive from the very politicians who foisted the tax upon them.

On Jan. 1, the City of Brotherly Love raised taxes on soda and other beverages by one-and-a-half cents per ounce. Public outcry followed and the mayor of Philadelphia, who had proposed the tax, blamed businesses for the jump in retail costs. The increase in consumer prices was to compensate on the retail side for a tax that was being applied on the wholesale price of the drink, so as to avoid the appearance of double taxation.

Asked if such a maneuver was being used in Illinois, Rodriguez reported that “[t]his tax will be paid by consumers. The proposal contains a pass-through provision requiring that the amount of the tax be added to the wholesale price of the beverage to retailers and retailers pass the tax on to consumers; the tax may be posted separately on sales slips and invoices.”

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Organizations in this Story

Illinois Chamber of Commerce Illinois General Assembly