Did Cook County's failed soda tax cause sales taxes to fizzle, too?

Cook County's short-lived penny-per-ounce tax on sweetened beverages not only failed to bring in as much revenue as projected, but it might also have cost the county millions in sales tax revenue as consumers crossed county and state lines to buy their groceries.

In a revenue report released ahead of today's county board meeting, receipts from the first three months of the ill-fated tax show it generated $46.4 million. That's less than the $55 million the tax initially was expected to raise during those three months, though projections later were revised to $49.8 million.

Meanwhile, the county's home-rule sales tax revenue was off by $12 million for the year, the revenue report shows. Cook County Board Commissioner John Daley attributed that to consumers angry about the sweetened beverage tax shopping elsewhere.

“I've never heard so much animosity to a tax than this,” Daley said. “People were telling me they'd go to Indiana to buy soda, and they weren't just buying their sodas there, but all their other groceries, too.”

All told, county revenue was down $5.4 million from what was budgeted for the year, according to the report.

Daley, a Democrat who heads the county board's powerful finance committee, was the linchpin in the Republican-led effort to repeal the controversial tax. Once Daley agreed to vote to repeal the tax, other Democratic board members who had initially voted in favor of the tax followed suit.

Sweetened beverage tax revenue shrank each month of its existence, according to finance bureau records. The county received $16.6 million in August, $15.3 million in September and $14.4 million in October. The decline in tax revenue from August to September is the equivalent of nearly 2 million fewer 2-liter bottles of soda being sold.

Receipts from November — the fourth and final month the sweetened beverage tax was in effect — aren't expected until next month, county officials said. But even then, the county will likely have to rebate a significant portion to retailers who prepaid taxes on inventory that wasn't sold before the tax ended on Nov. 30, just as those retailers paid millions on inventory purchased before the tax went into effect Aug. 2.

“It's not surprising that the numbers went down each month,” said Tanya Triche Dawood, vice president and general counsel for the Illinois Retail Merchants Association, a lobbying group that led a legal fight against the tax. “It was anecdotal, but what we were seeing overall was people definitely shifted sales elsewhere.”

Dawood said members of the association with stores in Cook County and right across the borders in collar counties were reporting declines in sales at their Cook County stores with corresponding increases in sales at non-Cook County retail outlets.

Initially billed as a health ordinance to help reduce obesity and diabetes cases in the county, the tax came under fire almost immediately from consumers, retailers and manufacturers. A court battle stalled its implementation by more than a month, and a federal advisory warning the county not to tax those participating in the U.S. Department of Agriculture's Supplemental Nutritional Assistance Program, or SNAP, lowered revenue expectations.

“These collections were achieved despite the multimillion-dollar campaign opposing the tax waged by the beverage industry and the reversal of a USDA opinion on whether SNAP purchases could be taxed,” said Edward Nelson, a finance bureau spokesman.

The repeal of the sweetened beverage tax created a $200 million budget hole for the county. In its aftermath, county board President Toni Preckwinkle unveiled a 2018 budget that called for program cuts and 321 layoffs, mainly from the sheriff's office and courts.

How Cook County sweetened beverage tax fell short

$46.4 million: Revenue generated by Cook County's sweetened beverage tax during the first three months

$55 million: Initial three-month revenue projection

$49.8 million: Revised projection after SNAP recipients excluded from tax

$12 million: Amount under budget for Cook County home-rule sales tax, which some attribute in part to shoppers' leaving the county

$200 million: Budget hole created by repeal of sweetened beverage tax

321: County employees laid off

Source: Cook County

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