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
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.”
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.”