By John F. Di Leo -
Life in Chicagoland, and the unfulfilling refreshment of a temporary stay…
For all we like to say about the great culture of ancient Greeks – for all intents and purposes, they invented theater, you know! – they were really just as human as the rest of us. Sometimes, no matter how well the story was going, they wrote themselves into a corner. There was just no way to resolve the situation and end the play.
So what did they do? They rigged up a contraption to lower Zeus down from the sky and utter some final judgment from Olympus that would resolve the conflict, punish the villains, send off the hero with a deserved bow, and save the poor playwright from having to come up with yet another convoluted act for us all to suffer through.
They called this technique a Deus Ex Machina – literally, “God from the machine.” When not only the cast and crew, but even the writers, are all stuck without an option, they call on the Heavens to save them. And sometimes it works. On the stage, anyway.
So it was in Chicagoland on Friday, June 30, in Cook County, Illinois, as the businesses and residents of one of America’s largest metro areas faced the last day before a massive new tax, ranging between thirty and seventy percent, was to kick in on almost all non-alcoholic beverage purchases. And they prayed for salvation from the heavens, in the form of a judge, Daniel Kubasiak, who might, just might, issue at least a temporary stay on this outrageous new tax.
The Context
Illinois is broke. The legislature in Springfield hasn’t even had a state budget in two years, as Speaker Madigan has refused to even consider the necessary structural corrections to Illinois government (pension funding, workmen’s comp costs, etc.) to enable the state to start the path to a stable footing.
Chicago is broke. Chicago has long had the power to force Springfield to do whatever it wanted, making the suburbs and downstate taxpayers fund Chicago’s outrageous pensions, wasteful schools, and crime waves. Now that Springfield can’t bail them out, Chicago is stuck trying to find ways to raise their own taxes… despite being a city that, like its state, is losing residents every day (95,000 more people fled Illinois than moved here, in 2016 alone, and the trend isn’t slowing down).
So Cook County is naturally broke as well. As a county, its costs aren’t as severe as Chicago’s or Illinois’ – it doesn’t have nearly as many programs to manage. But it does still have costs, and those costs keep going up. Cook County already has some of the highest property taxes in the country, and one of the highest sales taxes in the country too. So what’s to be done?
The Cook County Beverage Tax
In November, 2016, the Cook County Board of Confiscators passed a Soda Tax, to go into effect on July 1.
It’s not really just on soda, of course. It’s on sweetened beverages, no matter whether they’re sweetened with “real” sweeteners (sugar, honey, corn syrup, etc.) or “artificial” sweeteners (Aspartame, Saccharin, Splenda, etc.). It’s on regular pop and diet pop. It’s on sweet tea and diet sweet tea. It’s on lemonade and frappucino and Arnie Palmers and children’s juice boxes. It’s on fruit juice drinks, but not pure fruit juice.
It’s on sports drinks like Gatorade that are drunk by people who are exercising in an attempt to stay healthy; it’s on caffeinated beverages like Coke and Diet Coke that are drunk by people with three jobs trying to stay awake. It’s applied to most non-alcoholic drinks other than coffee, milk, and water.
And it’s enormous. A penny per ounce.
Now, that doesn’t SOUND enormous. But consider the fact that typical drinks are sold as twelve ounce cans in a case of 12 or 24, or 20 ounce bottles in an eight-pack, or two-liter bottles, or little four-to-seven ounce pouches in boxes of ten or twelve.
The fountain drink at your restaurant or fast food place may cost a dollar or two, and be subject to another ten percent sales tax, but now gets hit with another 24 or 32 cents for the soda tax (yes, even if it’s half ice).
The 24-pack of cola or diet cola or lemon lime that costs six to nine dollars, still subject to the ten percent sales tax, now gets hit with another $2.88 for the soda tax alone.
A one dollar two liter bottle of soda or juice drink contains 67.5 ounces; that’s another 67.5 cents in the beverage tax.
So yes, when you think of this new penny-per-ounce tax as you must – as a percentage of the price – you can’t avoid admitting that it’s an utterly confiscatory tax rate of thirty to seventy percent (sometimes lower, and sometimes even higher).
The Impact
The impact of such a tax can be imagined, easily, by anyone not in government… but the denizens of the Cook County Building in downtown Chicago deny such reality. County Board President Toni Preckwinkle only sees revenue. She’s baked these funds into her budget, and won’t consider even the possibility of repeal or rejection.
President Preckwinkle maintains that her soda tax is good for us; we should take our medicine and like it, and stop our bellyaching.
But we have seen this story play out before. Philadelphia implemented a strikingly similar tax a year ago, and it has – predictably – caused purchasers to flee the city, so we have the opportunity here to learn from their example.
Beverages are a big part of a grocery purchase, and of a restaurant purchase, and of even fast food and convenience store purchases. Change the price of the drinks, and you may move consumers to switch to a different vendor for the entire purchase.
Have you, personally, ever decided on which restaurant to attend, which grocery store to shop at, which fast food place to visit, based on a coupon or sale? (the constant offering of such sales and coupons says that you have, whether you admit it or not).
Such sales typically knock a dollar or two or three off the total purchase price, and that’s enough to get people to switch from McDonald’s to Burger King, or from Jewel to Mariano’s, or from WalMart to Meijer… and back again the following week, when it’s the other one running that sale, or offering such a coupon.
And that’s fine, by the way. That’s the way capitalism works, and it’s a good thing.
But what about when the government walks in and imposes a tax that instantly increases the price within its own jurisdiction?
People do what they must; they drive across the city line, or the county line, or the state line, and they shop somewhere else.
If your family’s grocery cart contains a 24-pack of soda, a pack of juice boxes, and a couple two-liters of lemonade, the new soda tax just increased your grocery bill by over five dollars.
If coupons for a dollar or two off can get people to change stores, it’s ludicrous to imagine that a person wouldn’t cross a county line for five.
Many people in Cook County already live close to a county line; it’s no inconvenience at all for them just shop in Illinois’ Lake, Kane, Dupage, or Will Counties… or even to cross the line into Indiana. For almost a million Cook County residents, the grocery stores, convenience stores, restaurants and fast food places of the next county over are just as convenient.
And think of the people who live in Cook but work in another county, or the reverse. If you do your shopping on your way home from work, or on your lunch hour, won’t a savings of five dollars or more affect the difference between buying on one half of your commute or the other half? Of course it will.
This is certainly what Philadelphia has learned, to its unjustifiable shock. People started leaving Philadelphia to do their shopping. Beverage sales dropped by half. Yes, half. The city raised far less revenue than it expected, infuriating its population as it failed to fill the whole budget hole it had thought solved.
If Philadelphia’s prices were just a bit higher than the prices in the suburbs before, many would tolerate it, because the drive out of town wasn’t worth the bother for a dollar or two in savings. But now that the difference is exacerbated, that calculation has changed. Now in addition to a couple dollars of average savings, there are clear three and four dollar savings you can point to, savings you can’t possibly miss. So people may still live in Philadelphia, but more and more, they shop in the suburbs.
Philadelphia’s tax has done one thing well: it has driving business to the Philadelphia suburbs. But something tells me that wasn’t the intended goal.
The Consequences of Shopping Expulsion
This predatory tax amounts to an expulsion of shoppers from the jurisdiction. The closer you are to the heart of the taxed area, of course, the less likely you are to shop elsewhere. But the closer you are to the border, the more likely you are to flee.
In Philadelphia, Pepsi alone had to lay off about a hundred out of 423 local employees because of Philadelphia’s soda tax. Canada Dry laid off 25. Grocery chain ShopRite, which operates six grocery stores in Philadelphia, had to lay off 300 people. And this is just a drop in the bucket.
Cook County is a bigger geographical area than the city of Philadelphia, and includes far more stores. With such a huge perimeter, hundreds of thousands of people will find it even easier to avoid the tax by driving another mile south, west, or north.
What we can extrapolate from the snapshot of the Philadelphia experience is this:
Cook County groceries, fast food places, and bulk stores will downsize – not willingly, but they’ll have to – with monumental consequences to their staff and their neighborhoods.
After all, most people won’t just pull their beverage business from their Cook County store or fast food place. Can you imagine buying the burgers at a Cook County Wendy’s, but then stopping at the DuPage County Wendy’s for the drinks? Can you imagine buying clothes, food, paper towels and wine at a Cook County Walmart, then stopping at the Will County Meijer for your soda, lemonade and juice boxes?
Would you ever do your grocery shopping at a Cook County Butera or Caputo’s, then leave all those bags full of frozen and refrigerated products in the car while you went to a Kane County grocery store for the soda?
Of course not. Business in Cook County will plummet, at every retail outlet that sells beverages. Grocery stores, fast food restaurants, bulk discounters – all of them will suffer. And when they suffer, they will lay off staff.
Now, when businesses suffer and lay off staff, that alerts the government, because the government’s other taxes go down. Along with their new revenue from the soda tax (which is still new money, even when it’s less than expected), there will be a drop in the other taxes they count on from these businesses. When you lose a $75.00 grocery sale because of a $5.00 soda tax, that means the county and city also lose the 10% sales tax they would have received.
And when the grocery stores and McDonald’s franchises lay off workers, thousands and thousands of them across the county in the months to come, the state will also lose the income taxes that those employees paid, and will probably instead have to fund welfare payments for many of those who lose their jobs because of this destructive tax.
Think about that. In Toni Preckwinkle’s greed, seeking to wring another $5.00 out of every $75.00 grocery order, she’s cost her county several dollars (not the full $7.50, because the full sales tax isn’t applied to everything in the cart). She’s not losing her county just the new tax, but the existing tax collection… not just on the product covered by the new tax, but also on the shopper’s entire order, because that order has fled her jurisdiction.
The collar counties are remaining silent on this political battle, of course. This may be a gold mine for them.
But it’s a death knell for Cook County, and for all the many communities, most of them the border suburbs, not Chicago, that stand to lose the most tax revenue.
And jobs.
The Human Cost
At a certain point in such a discussion, we have to consider the human cost of these changes. It’s not all about dollars on a ledger, after all, we’re talking about people.
Who works at these jobs, these cashier and stockboy and bagger and fry cook jobs that are going to be eliminated if the soda tax goes forward as planned?
Well, that’s a surprisingly broad mix of people, but there are a few big groups:
- Teenagers, getting their first job, probably not for a career, but to get a first job on the resume, not just for spending money, but also to get a good reference so they can get a better job next summer, or next year, or whenever they get out of school.
- Immigrants, also perhaps getting their first jobs here, as they learn to perfect their English and hope to rise up, reaching for the American Dream.
- Ethnic, racial, and other minorities, whose substandard public education hasn’t prepared them to go straight into the corporate world, people for whom this is the only start that might give them a chance to better themselves and rise up from poverty.
- Spouses of people with better jobs, bringing in some part-time money to help the family get through, or spouses of people who lost their jobs in the recession, so this is the only money coming in.
- Handicapped people, hard workers and good people who perhaps can’t do bigger, more complex jobs, and may not have a hope for a full-fledged “career” as such, but who depend on this job as much for dignity as for the paycheck. We count on the presence of these jobs for them as well; our days are brightened when they bag our groceries or greet us as we pass them, restocking the produce section.
These are the people who will lose their jobs because of Cook County’s soda tax. When Toni Preckwinkle and her majority of commissioners succeed in driving business out of Cook County, the unexpected joblessness of these good people – dozens from one community, hundreds from another, certainly thousands, all told – can directly be blamed on this thoughtless, destructive county board majority.
This tax isn’t just an inconvenience. It isn’t just another theft, a dollar here and a dollar there.
Empirical evidence from cities that have passed such a bill proves that this tax will throw people out of work, the very groups that Democrat politicians always claim so self-servingly to be devoted to.
So many people got their start in these kinds of jobs.
- Chicago’s media darling, Oprah Winfrey, started out at the corner store next to her father’s barbershop.
- Dallas Cowboys GM Jerry Jones, Investor Warren Buffet, and actor Bill Murray all started out working at grocery stores.
- Actress Eva Longoria started at a Wendy’s, actor Brad Pitt started at an El Pollo Loco, and singer Queen Latifah started out at a Burger King.
- The long list of people whose first job was at a McDonald’s is legendary, from comedian Jay Leno to actress Rachel McAdams, from Amazon founder Jeff Bezos to Congressman Paul Ryan.
Surely, many of these people would have made it big anyway. But would all of them have succeeded?
There’s no way of knowing.
All we know is that they did, that their first jobs, at grocery stores and fast food places and corner stores were, or them, the critical first rung on the ladder to success.
We cannot afford to so frivolously wipe out these jobs. It’s not just about what they’re paid today; it’s about the careers that they might lead to.
Today’s bagger might rise to be the produce manager, the store manager, even the owner of the chain.
Today’s drive-through cashier or burger flipper might be tomorrow’s store manager or entrepreneur, maybe even the CEO of the entire fast food empire.
But the short-sighted leadership of the Cook County Board cannot, or will not, think that far ahead.
To them, it’s about filling a field on a ledger, and they’ll do it, no matter how many lives are destroyed in the process.
The Court Case
And so we found ourselves, on Friday, June 30, desperately awaiting word from a judge’s chambers.
An association of plaintiffs, including grocery chain owners and led by the Illinois Retail Merchants Association, has taken the county to court, arguing that the tax is so preposterously vague, it’s both nearly unenforceable and utterly unfair.
The Illinois State Constitution, adopted in 1970, requires that taxes must be evenly applied to products within the same product type. The arbitrary distinctions between beverages within the same class, in this convoluted tax, are plainly in violation of that constitutional requirement.
Whether the courts will support that argument, either in a last minute stay or in a permanent ruling, is an open question. Illinois courts are not exactly known for their adherence to the concept of the rule of law. This is, after all, the state in which its state supreme court ruled that Rahm Emanuel, having rented out his Chicago home and moved to Washington DC two years earlier, met the residency requirement to run for Mayor of Chicago.
Chicagoans are advised to put not your trust in courts, lest your hearts be broken.
If it is overturned in the courts, the Board will most likely still work to retool it to make it constitutional; they’ll find a way to overcome the distinctions between product classes so it passes legal muster.
In the end, the solution is not to pray for a demigod to rise up from behind the stage and solve our problems for us. The solution is to cut the institutional costs that have rendered Cook County unsustainable. Ejecting illegal aliens from Cook County, and replacing the justice system’s revolving door with locked cells, would together solve the county’s woes. The high cost of both our county hospitals and our county jails is caused by these criminals.
But we’re not likely to solve that problem in today’s Cook County. They are too wedded to their policy of Chicago as a sanctuary city, a magnet for criminals from all over the world, to ever consider cracking down on the crime problem these reprobates bring, and paying attention to the costs of County Hospital directly attributable to their drugs, their stabbings, and their shootings.
So here were are, on Friday, June 30, staring at the face of a heartless Cook County Board majority, a destructive tax plan just hours from implementation, with this desperate hope for a judge to stand up and deliver salvation.
And so he did, on Friday afternoon. At the eleventh hour, Judge Kubasiak issued the hoped-for temporary stay.
But, like that old Greek tragedy, the ending is unsatisfying, because we know the issues aren’t resolved, and both sides will regroup, with much to fight over as Cook County Democrats continue to keep the county in an economic death spiral, refusing, like their friends in Chicago and Springfield, to undertake the critical institutional changes necessary for any hope for improvement.
Copyright 2017 John F. Di Leo
John F. Di Leo is a Chicagoland-based trade compliance manager, actor and writer. A former Republican activist and onetime Milwaukee County Republican Party Chairman, he has now been a recovering politician for twenty years.
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