That 2-liter of pop you’re picking up for the Fourth of July picnic might pack a little sticker shock this year as Cook County rolls out a new penny-per-ounce tax on a wide variety of sugar- and artificially sweetened beverages.
As one example, a 2-liter bottle, which usually costs about $1, will incur a 67-cent soda tax.
The county’s sweetened beverage tax, which takes effect July 1, is one of many so-called soda taxes popping up across the country as elected officials seize upon the opportunity to raise revenue while attempting to improve public health. Conditions such as obesity, diabetes and heart disease are linked to consumption of sugar-sweetened beverages, though the science on artificially sweetened beverages is less conclusive.
This policy trend has pit public health experts and local leaders against the beverage industry and small-business owners.
Here’s what you need to know.
What kind of drinks will be taxed?
Any nonalcoholic beverage that’s either sugar- or artificially sweetened will be taxed, which means fountain drinks as well as bottled and canned beverages. The tax will apply to 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 beverages.
The tax does not apply to 100 percent fruit or vegetable juice; milk and milk substitutes; infant formula; and beverages for medical use, among other exceptions.
Thrifty bar patrons may want to drink their whiskey straight: Any mixer that’s a sugar- or artificially sweetened beverage will be subject to the tax.
Restaurants offering free refills can shoulder the added cost of the tax on refills and not pass it on to consumers, according to county officials.
The Internet will not save you. Drinks purchased from Amazon and other online retailers are still subject to the tax if they’re delivered within Cook County, regardless of where the business is located.
How will this tax be implemented?
It’s complicated, but here’s the basic idea: Shoppers pay the tax at checkout, essentially reimbursing retailers and restaurants who pay the tax upfront on product as it comes in the back door from distributors, who in turn collect the tax and remit it to the county.
Why is the county rolling out a new tax?
This one’s simple: The county needs money to maintain existing services. But Cook County Board President Toni Preckwinkle also hasn’t been shy about touting the potential health benefits.
“We know we needed revenue, and property tax was off the table. We’d raised the sales tax. We decided to do something that would not only raise revenue, but would have a public health impact,” Preckwinkle said recently.
The county initially projected the tax could bring in about $224 million a year. That was before officials decided — after receiving guidance from the state Department of Revenue — the tax won’t apply to almost 900,000 Cook County residents who receive benefits from the federal food stamp program, officially known as the Supplemental Nutrition Assistance Program, or SNAP.
The county now says the tax should generate $200.6 million over a full year.
Why is the beverage industry fighting the tax?
There’s a lot of money at stake. Though the sheer volume of pop consumed has declined in recent years, carbonated soft drinks still represent more than $73 billion in on- and off-premise retail sales in the U.S., according to data from Euromonitor International. Fewer sales could mean more pressure on profits and lead to job cuts, industry groups have warned.
The American Beverage Association, the industry trade group representing companies like Coca-Cola and Pepsi, has spent millions of dollars fighting soda taxes in various U.S. cities, including Philadelphia; Boulder, Colo.; and Berkeley, Calif.
Here in Cook County, the American Beverage Association is funding the Can the Tax coalition of local business groups and retailers fighting to repeal the tax.
How will this affect local retailers?
Stores worry that shoppers who live near the county line will simply take their business to collar county stores, which likely would mean a decline in overall grocery sales for Cook County retailers, said Brian Jordan, president of the Illinois Food Retailers Association. “This is a terrible, regressive tax that will hurt consumers and impact businesses,” he said.
Retailers also worry the SNAP exemption will cause additional logistical headaches for stores, but the county this week adopted a temporary measure aimed at easing the burden on SNAP retailers during the first year the soda tax is in place.
Opponents of the tax have said the flurry of changes to the regulations in recent weeks have further confused retailers; county officials have said they’re working to address concerns as they arise.
Will this tax really improve public health?
Advocates say soda taxes will act as a deterrent and change consumer behavior over time, which could in turn lower obesity rates and reduce health care costs.
Money from the tax also will support new and continuing county services, such as providing health care, improving access to healthy food and offering job training, said Karen Larimer, president of the American Heart Association’s Metro Chicago board of directors.
“I’m a big believer in the greater social determinants. When you support employment, you’re supporting public health,” Larimer said.
But it remains unclear how this tax will improve the health of those living in low-income neighborhoods so long as SNAP purchases are exempt. Ted Nelson, spokesman for the office of chief financial officer of Cook County, noted people go on and off the temporary assistance program over time as their situation dictates.
“(We) don’t view this as a one-off public health benefit; as was the case with smoking, a long-term reduction in the consumption of sweetened beverages will have a positive effect on such health conditions as obesity, diabetes and heart disease,” Nelson said in an email.
An earlier version of this story incorrectly identified the Cook County chief financial officer.
Hal Dardick contributed.
gtrotter@chicagotribune.com
Twitter @GregTrotterTrib
