Jan 07, 2008

Lawsuit Filed to Overturn Chicago Bottled Water Tax

Suit claims tax is in violation of state's constitution

The International Bottled Water Association (IBWA) filed a lawsuit Jan. 4 in Illinois’ Cook County Circuit Court to overturn a City of Chicago ordinance that imposes a regressive 5-cent-per-container tax on bottled water. Other plaintiffs in the suit include the Illinois Retail Merchants Association, the Illinois Food Retailers Association and the American Beverage Association.

“The Chicago bottled water tax is a bad idea for many reasons,” said IBWA President and CEO Joe Doss. “It is both unlawful and in violation of state’s constitution and will significantly increase the cost of this healthy, safe product. The bottled water tax is regressive and will place an unfair burden on those who can least afford it: the city’s low and fixed-income citizens, including the elderly. It is the consumer who will ultimately bear the brunt and pay the tax, which will add about 30% to the cost of a case of bottled water.

“This narrowly focused, punitive tax will make it more difficult for consumers to drink bottled water, and that is not in the public interest,” Doss said. “Bottled water is growing in popularity because of its consistent quality, taste and convenience. And many people choose it over other beverages because it does not contain calories, caffeine, sugar, artificial flavors or colors, alcohol or other ingredients consumers may wish to avoid or moderate.”

IBWA and fellow plaintiffs argue that the ordinance, which became effective on Jan. 1, 2008, unlawfully taxes a food product, which is expressly prohibited by Illinois law. Furthermore, the Illinois State Constitution requires tax uniformity, meaning that a specific product cannot be taxed when other similar products are not. The bottled water tax does not include other packaged beverage products that are made mostly from water. IBWA also claims that levying a special tax on bottled water could cause consumers to purchase less healthful alternatives.

“The bottled water tax places an unlawful burden on retailers, ranging from small, locally owned grocers to the larger chain operations that employ thousands of Chicagoans and invest in the City’s economy with jobs, taxes, and development,” Doss said. “This tax just doesn’t make legal or fiscal sense and it will cause consumers to shop for bottled water outside city limits, thereby hurting Chicago’s retail and wholesale businesses. When companies are burdened by onerous taxes, they may look to relocate to more ‘business friendly’ areas. Leaving the tax in place will certainly have a negative impact on the 4,500 jobs and $270 million in wages for Chicagoans working in the bottled water industry.”

Doss also noted, “Reasons cited for the tax have ranged from alleged environmental protection--although none of the tax revenue is earmarked for that purpose--to closing the City’s budget deficit. However, the $10.5 million in revenue anticipated by the City of Chicago through this tax is highly inflated. In fact, higher consumer prices for bottled water brought about by the increased tax could cause demand to subside, with a corresponding decrease in projected tax revenue.”

IBWA claims that the bottled water industry has taken steps to reduce its environmental footprint through the use of lightweight packaging and direct support and involvement in recycling educational and advocacy programs, and that any actions taken to reduce the environmental impact of packaging must focus on all consumer goods and not target any one industry.

“We hope that, in the end,” Doss said, “Chicagoans will be able to choose the healthful benefits of bottled water consumption without added cost and measures that penalize smart beverage choices.”