Daniel Stein estimates Cook County’s sweetened beverage tax has cost his vending machine company about $75,000 so far, a figure that doesn’t even include lost sales.
The Dec. 1 repeal of the penny-per-ounce tax on sugar and artificially sweetened beverages likely will cost him more before it’s all over. He’ll again have to send technicians to his 850 or so vending machines in Cook County to adjust the price of products. But Stein feels only happiness and relief that the tax that’s consumed his life for months will soon go away.
“I don’t want to sound judgy but this whole thing has been kind of unfortunate. I’m just glad it’s almost over. … Closure is good,” said Stein, owner of Northbrook-based Mark Vend.
Wednesday’s repeal vote was a resounding victory for the beverage industry, powered by giant corporations like the Coca-Cola Co. and PepsiCo, that spent millions fighting the unpopular tax. But Cook County retailers and restaurants, many of whom joined forces with Big Soda in opposition, also celebrated the win after seeing sales dwindle and customers stray across county lines since the tax was implemented Aug. 2.
“Obviously, our members are very pleased,” said Rob Karr, president and CEO of the Illinois Retail Merchants Association. “Now the hard work for retailers begins — to win back shoppers who took their business elsewhere across county lines.”
The short-term impact of the tax was felt by stores both big and small.
Costco’s nine Cook County locations saw a 34 percent decline in sales of beverages affected by the tax, said John McKay, chief operating officer of Costco’s northern division.
The chain saw a corresponding increase of 38 percent in sales of sweetened beverages in its nine stores just outside Cook County, McKay said.
“You’re displacing shopping from one area, you’re creating congestion in another and it’s just counterproductive,” McKay said.
At Fairplay Foods in suburban Worth, sweetened beverage sales were down about 47 percent, said Rosie Regas, co-owner of the independent chain. Fairplay’s three Chicago stores saw a smaller but still significant drop in sweetened drink sales of around 27 percent.
Regas said she didn’t blame customers for shopping elsewhere; she did the same, driving from her home in Orland Park into Will County to avoid the tax.
“This was a nightmare. I get it — the county needs money. But find another way,” Regas said.
And the hospitality industry already has been feeling the cumulative burden of various taxes, said Sam Toia, CEO of the Illinois Restaurant Association. The sweetened beverage tax did nothing but further diminish already thin profit margins, he said.
There are similar sweetened beverage taxes in other jurisdictions in the U.S. — such as Philadelphia and Berkeley, Calif. — but Cook County’s tax was unique in how mired in controversy it was leading up to and during its implementation, said John Cawley, professor of policy analysis and management at Cornell University.
At one point, the county said the the tax would apply to purchases made with federal food stamp benefits, then reversed course after receiving further guidance from the state, Cawley noted. Such administrative gaffes created genuine confusion and the well-funded opposition benefited, he said.
“There were constant challenges that may have contributed to this fatigue. It’s not just on the county government. Millions were spent by the beverage industry and the Can the Tax Coalition to engineer this result,” Cawley said.
The sweetened beverage tax also triggered numerous lawsuits, some of which are still playing out in court. The Illinois Retail Merchants Association sued the county to get the tax thrown out days before it was to take effect. The court granted a restraining order to keep the tax from being imposed. Later, however, the court allowed the tax to move forward. The merchants appealed that decision.
“The appeal of the circuit court judge’s dismissal is still pending,” said lawyer David Ruskin, who is representing the merchants.
Several retailers have been sued for allegedly misapplying the tax. A Schaumburg man is suing Walgreens for allegedly wrongly charging the tax on unsweetened sparkling water. The case, which seeks class-action status, is still pending, said Elizabeth Fegan, the lawyer for Vincent De Leon.
“Walgreens has filed a motion to dismiss, which we plan to oppose,” Fegan said.
Cawley, the Cornell professor, said there is a legitimate policy argument for taxing sugary food and beverages linked to obesity and diabetes because those conditions drive up health care costs for all.
Groups like the American Heart Association, the Illinois Public Health Institute, the World Health Organization and the Center for Science in the Public Interest have touted the public health benefit of taxing sugar-sweetened beverages.
But that argument was watered down in Cook County, where the tax also included artificially sweetened beverages and also didn’t apply to food stamp purchases.
“(Taxpayers) will continue to cover the rising costs of treating the chronic diseases caused by drinking too many sugary beverages while also seeing cuts to health care services for our most vulnerable communities,” Elissa Bassler, CEO of the Illinois Public Health Institute, said in a statement.
Cook County retailers cheer soda tax repeal: ‘This was a nightmare’ – Chicago Tribune