People in Chicago were set to have a soda tax conundrum of magnitude proportions. Grocery tax, a 3% City of Chicago tax, and a Cook County tax charging 1¢ per ounce. That's right. Not a fixed percentage but tied to a measurement.
The Cook County version isn't limited to regular soda but impacts soda and diet soda; ready-to-drink sweetened coffees and teas; sports and energy drinks; and juice products that aren't 100 percent fruit or vegetable juice, among other products.
The latest tax was scheduled for July 1 but has been delayed as we figure out some of the logistical hurdles this new tax would reveal.
Regular readers know I don't like soda taxes, especially since millions of taxpayer dollars are given to the people who make high-fructose corn syrup. Consumers aren't paying the real price for those soft drinks. Want to discourage soda consumption? Zero out those subsidies for high-fructose corn syrup.
The proposed Cook County soda tax, which affects way more than soda, is a horrible economic proposal even in the world of soda taxes.
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The obvious comparison is the Philadelphia soda tax, which has been 1.5¢ per ounce since the beginning of 2017. Both the Philadelphia and potential Cook County soda taxes have brought up the question: What about free refills? What about the ice in a soft drink?
In the Cook County example, the tax is paid by the distributor and has to be passed on to the consumer. In a 32-oz. drink, you could charge 32¢ (48¢ in Philadelphia) tax with or without ice or try and factor in how much ice is in the cup.
Since consumers have to pay the tax, refills can only be done if the business controls the refills and a "free refill" is still 1¢ per ounce.
The syrup is taxed not on the actual amount but how much soda the syrup will create. That is a lot of upfront cost to the business.
At least Philadelphia made an argument for the tax money going to health. Cook County isn't even making that argument.
An exemption will apply to those on the Supplemental Nutrition Assistance Program (SNAP), the federal food stamp program. We see how that might work in the grocery store, but people on SNAP would have to show proof in a restaurant to not pay the tax there. Those people won't find the effort worth stating in public that they are getting help.
As exciting as "free" refills are, these taxes do illuminate the insanity that is the excitement of refills for a product that costs pennies to make. Refills don't cost fast food places a lot of money, especially if they encourage more eating (as sodas tend to do anecdotally). The headache comes not in the cost but collecting a random tax.
We do like the idea of adding a disincentive on "juice cocktails" that try and trick people in buying juice when it's not all juice. Then again, lemonades aren't trying to trick people but are lumped in the same category.
The solution to the latter problem is to reflect the true cost of high-fructose corn syrup. The tax is supposed to be a punishment but if consumers don't understand the impact of high-fructose corn syrup in the drinks in the first place, they aren't learning anything except why Cook County and Philadelphia is being so inefficient in their government structure.
The fact that various random drinks are also taxed at this level. Not a fan of diet drinks ever, but to treat them the same with this onerous tax sends confusing messages.
Then again, the proposed Cook County soda tax has nothing to do with health but is a money grab and one that produces real hardship for businesses.
There is a need to improve the numbers on soft drinks and similarly sweetened beverages. The system has been set up for some time to make soft drinks more alluring because they are artificially cheap. Taxation without education won't change trends on a long-term basis. Long-term changes should be the goal.
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While this would apply to Chicago, the same is true for any American city: 3 different taxes on the same product. That looks ridiculous. We don't like Chicago's 3% tax but by comparison, that tax is reasonable to consumers and businesses alike. The Cook County proposed soda tax covers a larger scope than Chicago but the people of Chicago are already plenty "punished" for taxes on soda.
Sierra Mist quietly went back to high-fructose corn syrup after switching in a loud fashion. Soft drink makers have come out with cane sugar versions. Ideally, pop or soda would be made with good ingredients and be a treat. Not everyone will make that choice but getting people to that point would mark progress toward a better balance.
photos credit: me
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