Bottled Water Tax Scrutinized

The beverage and retail industries took a stand today for their already over-taxed customers by filing a lawsuit seeking to invalidate the city of Chicago’s new 5-cent-per-bottle tax on bottled water, which amounts to an astounding 30 percent tax on a case of safe, healthy bottled water.

The first-of-its-kind tax, which took effect Jan. 1, is being paid by Chicago retailers and ultimately consumers who buy their water in the city of Chicago. The $10.5 million the city claims it will raise from taxing this healthy product is earmarked solely for general revenue purposes, not for environmental purposes.

"We’re going to stand up for our customers, both retailers and consumers who are being forced to pay a tax on a healthy product like bottled water," said Susan Neely, president of the American Beverage Association, which represents the non-alcoholic beverage industry including bottled water producers. "We’re not just going to take a tax like this without raising a challenge. It’s disconcerting that government spending is leading government officials to start taxing products that are good for you simply to cover their budget deficits. Like most Americans, we’re confident Chicagoans are tired of being taxed for every facet of their life, including drinking more water."

The four plaintiffs in the lawsuit are the American Beverage Association, Illinois Retail Merchants Association, Illinois Food Retailers Association and the International Bottled Water Association. The suit was filed in Circuit Court of Cook County.

David F. Vite, CEO of the Illinois Retail Merchants Association, said Chicago residents are already leaving the city to avoid its high taxes on products like gasoline. Vite warns that consumers will migrate to the suburbs for bottled water and other groceries as well, hurting not just Chicago retailers but the city’s economy.

"This will affect any Chicago retailer that sells bottled water because people will shop at grocery stores outside the city," Vite said. "And they’re going to buy more than just bottled water at those stores. They’re going to buy all their groceries there. This tax is just bad business for Chicago and its consumers."

The lawsuit argues that the tax should be invalidated because:

1) The practical incidence of the tax falls squarely on retailers and wholesalers. The city has no authority to impose such a tax.

2) Because there is no real and substantial difference to support singling out bottled water, the tax is unconstitutional and violates the Uniformity Clause of the Illinois Constitution.

3) The bottled water tax threatens to harm retailers and retail jobs, consumers and the Chicago economy. Neely listed the negative impact of the tax on retailers:
— The 5-cent-per-bottle tax amounts to a $1.20 tax on a typical $3.99 case of bottled water – a whopping 30 percent tax. And on a product that’s good for you no less. — The tax will ultimately be paid by consumers, giving them yet another reason to shop at suburban stores. This will cost Chicago retailers business and the city revenues from all goods and services these shoppers will now buy while in the suburbs. — Roughly 4,500 Chicago-area jobs accounting for $270 million in wages are linked to bottled water. These jobs are held by real, working families–truck drivers, mom-and-pop store owners, grocery clerks and bottling factory workers. This tax certainly threatens a good portion of those jobs in Chicago, all at a time when economic and job security concerns are No. 1 on the minds of Americans. — The tax disproportionately harms low-income families and seniors, who spend a larger part of their income on food.

"I’m not aware of any product, service or business in Illinois that gets taxed at 30 percent," Vite said. "During this time when consumers are growing more concerned about the economy, we should be making it easier for them to buy groceries and other goods, not burdening them with more taxes. Leave their pocketbooks alone."

Neely argued that lawmakers who try to use the environment as justification for this tax are simply resorting to sound-bite environmentalism that has little impact. Further, the revenues are going directly to the city budget coffers, not environmental programs.

Besides, water bottles are 100 percent recyclable and account for less than one-third of 1 percent of the municipal waste stream. And the amount of oil used to make plastic water bottles accounts for less than 5/100 of 1 percent of American oil consumption. By making its bottles lighter and lighter, industry makes strides each year in further reducing its already minimal impact.

Of course, the simplest way to ease any environmental concerns is to drop the fully recyclable bottle in a recycling bin after enjoying the water. "This tax just defies common sense any way you look at it," Neely said. "We’re hopeful this lawsuit will help common sense reign again for the sake of our customers."

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