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Chicago Tax Repeal Shifts Momentum in Favor of Soda Industry

Updated on
  • Commissioners repeal tax that went into effect in August
  • Cook County now faces $200 million hole in its budget

Momentum has shifted in the battle over taxing sugary beverages.

Commissioners in Cook County, home of Chicago, voted to repeal a tax on sweetened beverages on Wednesday, less than a year after voting in favor of the measure and only two months after it went into effect. Michigan lawmakers also pushed forward a bill to ban future attempts to enact food and beverage taxes at the local level on Thursday. Soda taxes were voted down in Santa Fe, New Mexico, in May and in St. Helens, Oregon, earlier this month.

The news represents a victory for the beverage industry, including Coca-Cola Co. and PepsiCo Inc., which have lobbied against the taxes.

“There are better ways to address obesity and help fix government budgets gaps than taxes that hurt local businesses and everyday consumers,” the Coca-Cola Co. said in a statement following the repeal. “Our combined product and marketing efforts can be more effective at reducing the sugar people drink over the long term.”


Raising Revenue

Cash-strapped cities have been increasingly looking at beverage taxes as a way to shore up their finances, but they’ve had limited success in pushing them through. Philadelphia became the first major U.S. city to pass a tax on soft drinks in June 2016. Four U.S. cities followed suit in November, including Chicago. Prior to Philadelphia’s success, there had been about 40 attempts to enact a soda tax in cities across the U.S. since 2009. Only Berkeley, California’s measure passed.

Ads in favor of the tax were financed by New York Mayor Michael Bloomberg, who gave $10.2 million in support of the measure and whose philanthropy supports anti-smoking campaigns and other health initiatives. The former mayor, who has backed similar measures in other U.S. cities, is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

The soda industry, represented by the American Beverage Group, has spent millions of dollars in the fight against taxes on its products. The Cook County tax will remain in place until early December. It took effect in August.

“The Cook County Board’s decision makes it clear that momentum is not with politicians who try to use excessive taxes on the everyday beverages that people buy -- and local businesses count on - to close budget gaps under the pretense of public health,” Lauren Kane, a spokeswoman for the group, said in a statement.


Budget Hole

The repeal creates a $200 million hole in the county’s budget for next year, according to S&P Global Ratings. That represents about 10 percent of general-fund revenue.

Commissioner Larry Suffredin, one of two commissioners voting in favor of keeping the tax, wrote in the Chicago Tribune he supported it because of the financing gap and the measure’s potential to help fight increases in heart disease, diabetes and obesity.

Philadelphia’s success was achieved by shifting the debate away from health toward the city’s budget shortfall. Opponents of the bill said it hit small business and unfairly singled out beverages.

“The soft-drink manufacturing industry has had mixed success fighting these taxes in recent years,” said Ali Dibadj, an analyst at Sanford C. Bernstein & Co., in research note. “This win in Cook County seems to shift the tide somewhat in its favor.”

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