Cook County (Chicago) set to repeal its unpopular soda tax: Regressive, unpopular, and ineffective.


The Chicago Tribune reports that the Cook County pop tax will soon be no more.

The Cook County pop tax is headed for repeal after commissioners overwhelmingly signaled their intent to do away with it, marking a big win for soda companies and store owners after both sides spent millions of dollars to sway public opinion on the issue.

A 15-1 test vote on Tuesday makes Wednesday’s final consideration a mere formality. County Board President Toni Preckwinkle, who pushed hard to keep the pop tax, conceded defeat…

It appears the commissioners bowed to popular opinion.

Our history is full of examples of what can happen when our leaders engage in taxation without representation. It’s a story as old as our American Revolution,” said Commissioner Richard Boykin, an Oak Park Democrat. “It doesn’t matter whether you tax tea or tax sugar. Eventually people get fed up. Eventually people say enough is enough. That is what happened here.”

The story is worth reading for its insight into soda politics.

E21 analyst Charles Hughes predicted the repeal earlier this week.

The tax was beset with implementation problems throughout. Much of the burden would be borne by lower-income households, and revenue generation would be likely to fall short of overly optimistic projections.

Cook County does have substantial budget problems, but the tax was the wrong way to try to solve them…

The recent experience with the cigarette tax should have been a sign that relying on a sweetened beverage tax to generate revenue of the magnitude they were projecting would be misguided. Even as the rate of the cigarette tax has increased, revenue has been falling due in part lower consumption caused by higher prices.

Earlier this year, Seattle adopted a sugary-drink tax. At the time, we noted the paradox:

It’s another of those odd tax policy efforts that seeks simultaneously to boost revenue and discourage consumption. The more they succeed in the latter objective, the more they fail at the former.
Seattle, of course, also adopted an income tax. Attorneys Scott M. Edwards and Justin E. Hobson point out the connection in a TaxNotes analysis of the income tax. 

…the Seattle City Council recently passed an ordinance that will create a progressive income tax targeting “high- income” households. The primary motivation articulated to adopt a progressive city income tax is to offset the regressive effects of state taxes. That’s ironic considering Seattle’s adoption of a regressive sugary-beverage tax. The council apparently wants to discourage both sins: drinking soda and earning money.

Wry comments aside, soda tax experiments generally don’t work out so well, as the Tax Foundation reports.

Our research has generally concluded that soda taxes are narrow, punitive taxes that are a budget risk not likely to solve America’s health issues. They’re a misguided attempt at solving a multifaceted health problem and will introduce many unintended fiscal consequences.

First, let’s remember that these taxes are regressive.

It’s possible, TF writes, that the tax could, perhaps, improbably fail to meet either of its contradictory objectives (raising money and reducing caloric consumption).

“Proponents of soda taxes often reference the success of cigarette taxes in decreasing cigarette use. However, cigarettes and soda differ in a number of ways. First, cigarette taxes increase prices significantly, a tactic that may be unjustifiable for soft drinks given that, unlike cigarette use, moderate soda consumption is considered safe. Second, the many available soda substitutes may render soda taxes ineffective, in that consumers will replace highly-taxed beverages with low-tax alternatives with the same health consequences.”

At the end of the day, soda taxes are a regressive tax on a product that’s probably fine in moderation. These taxes likely won’t fund what’s being promised, won’t resolve the obesity problem, and will hurt workers and consumers.
And the tax, as Cook County found, is unpopular.