The Chicago City Council passed Mayor Daley’s budget yesterday, which included a five-cent taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. per unit of bottled water sold in the city, in addition to a fairly large property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. hike. From the Chicago Tribune:
Brushing off a rare show of opposition, Mayor Richard Daley won easy City Council approval Tuesday of a spending and tax plan that will tap into the wallets of just about everyone who lives, works or plays in Chicago.
The package, which takes effect Jan. 1, includes the biggest property tax hike of Daley’s 18-year tenure as well as higher taxes on beer, wine and liquor, a new 5-cent tax on bottled water and increased water and sewer fees.
The most controversial item was the $86 million property tax increase, which passed on a vote of 29-21.
So why did the council enact a five-cent tax on bottled water? Is it defensible under any principle of sound tax policy? Is it defensible as a Pigouvian taxA Pigouvian tax, named after 1920 British economist Arthur C. Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes. ? It may or may not be, but the mayor didn’t really care about that either. There was no study shown supporting such an optimal Pigouvian tax. He just wanted to raise revenue via an arbitrary tax source that has no justification to be used as a general revenue source. And if you can believe this, another reason that was actually cited in a previous article when this issue was first being debated was that the city was upset that people were buying bottled water and not purchasing the water via the city’s monopoly on tap water. Unbelievable.
Also, you Bleacher Bums at Wrigley Field will be paying more for the beer you drink next summer as this new plan also raises taxes on alcoholic products. Maybe a tax on Baby Back Ribs is next.
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