Illinois House Republicans, Democrats file bills to repeal Cook County pop tax

Aug 15, 2017

Updated

Republican state lawmakers from the Chicago-area have introduced legislation to repeal Cook County’s controversial penny-per-ounce pop tax.

State Rep. Michael McAuliffe, R-Chicago, along with GOP state Reps. Christine Winger of Bloomingdale, Peter Breen of Lombard, Grant Wehrli of Naperville, and Keith Wheeler of Oswego are sponsoring House Bill 4082, which would immediately repeal Cook County’s pop tax and prevent other home rule counties from collecting tax revenue on sweetened beverages based on volume sold.

“This pop tax is a repeated example of another financial burden being imposed upon the people of Cook County. The vetting of this measure was short-sighted and irresponsible as roll-outs of similar pop taxes in other cities have proven to be not effective and even harmful to the local economy,” said McAuliffe, who added that feedback from his constituents regarding the tax has been “overwhelmingly negative.”

“The taxpayers are understandably frustrated and there is a lot of confusion,” he said.

The new levy on sweetened beverages, which went into effect Aug. 2, has angered and confused both consumers and retailers since a Cook County judge last month dismissed a lawsuit that temporarily blocked the tax from taking effect.

Cook County Board President Toni Preckwinkle, who introduced and pushed the pop tax, has defended the measure, saying the revenue is needed to help pay for the county’s essential health care and criminal justice programs, and to prevent layoffs.

There are efforts to repeal the new tax at the local level, too.

Last week, a bipartisan group of Cook County commissioners filed an ordinance to repeal the tax and is expected to be heard at a board meeting next month. Preckwinkle has promised to veto the repeal effort and said she is confident there are enough votes to uphold a potential veto.

House Republicans sponsoring the legislation aren’t sure if it will survive in the Democrat-led General Assembly, but warned failing to repeal the tax will not only hurt families and business, but also have major consequences for the county’s economy.

“On the heels of being hit with a 32 percent income tax hike, the residents of Cook County were immediately saddled with a costly tax on sweetened beverages,” Breen said in a press release. “It’s time for government to live within its means and quit turning to taxpayers for more of their hard-earned money. Through this legislation, the Cook County beverage tax will be repealed, and a law will be in place to prohibit any similar taxes in other Illinois counties.”

According to an analysis conducted last year, imposing a penny-per-ounce tax on sweetened beverages could cost the county 6,100 jobs, $321 million in wages and $1.3 billion in economic activity.

Meanwhile, the Illinois Liquor Control Commission contends the Cook County pop tax could violate state law, reports Crain’s Chicago Business columnist Greg Hinz.

More from Crain’s:

In a letter to Cook County Board President Toni Preckwinkle, the commission wrote that even though the tax on sweetened beverages excludes alcohol, many of the wholesalers to which it applies distribute both kinds of products and therefore have to deal with the tax complications of the county’s new levy […]

The liquor commission’s beef involves what occurs at the wholesale level, specifically refunds retailers may seek from their wholesaler to make up for the refunds they have to give to food-stamp users.

Under state law, the letter states, distributors are prohibited from providing “anything ‘of value’ ” to retailers—a provision aimed at kickbacks and other illegal activity in the highly regulated alcohol business. But the new county law clearly creates the possibility of retailers frequently seeking refunds from their wholesaler, it continues. “These refunds or credits are something ‘of value.’ . . .The opportunity for potential abuse by either the licensed Illinois distributors or licensed Illinois retailers to violate the ‘of value’ prohibition will be very high, and the commission simply does not have the resources to examine every credit memo.”

Additionally, both the Illinois Department of Revenue and U.S. Department of Agriculture have warned exemptions for recipients of Supplemental Nutrition Assistance Program benefits, or food stamps, violate federal law because some store owners have the option to collect the tax and then immediately issue a refund to customers.

As a result, the federal government has threatened to halt $87 million in annual SNAP administrative payments to Illinois unless county officials fix the way the pop tax is set up.

According to House Republican sponsors, consumers in Cook County will, on average, pay 67 percent more for a 2-liter bottle of pop and 43 percent more for a gallon of sweetened iced tea.

Updated Aug. 16 at 3:30 p.m.: House Democrats also have introduced legislation—HB 4083—that prevents both home rule and non-home rule counties from levying a tax on sweetened beverages based on both volume and weight sold. The bill would take effect immediately and would undo the Cook County pop tax.

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