Attention Chicago Residents: Buy Your Bottled Water Before Midnight (Though A Legal Challenge is Pending)

December 31, 2007

In a few hours, Chicago residents will be paying $10.5 million more for bottled water, due to the implementation of the 5-cent-per-bottle tax we blogged about here. We wrote:

So why did the council enact a five-cent tax on bottled water? Is it defensible under any principle of sound tax policy? … [The mayor] 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.

Maybe we spoke too soon: the tax will soon be challenged in court:

[The plaintiffs will be the] American Beverage Association, the International Bottled Water Association, the Illinois Retail Merchants Association and the Illinois Food Retailers Association….

Illinois Beverage Association Executive Director Tim Bramlet said that after appeals to the City Council to vote down the tax failed, a lawsuit was the next recourse. The associations, which Bramlet said will be represented by Jenner & Block in a suit to be filed in Cook County Circuit Court, claim the tax is illegal based on existing statutes that prohibit the state from singling out a specific food product with a specialized tax.

“State law prohibits the City of Chicago from imposing a tax on a single product like they have done with this bottled water tax,” Bramlet said. “If this tax is allowed to go into effect, then what is to preclude the City Council from deciding to tax salad dressing or lawn mowers?”

The statute to which Bramlet refers may be 65 Ill. Comp. Stat. 5/8-3-5, which reads that:

All taxes levied by a municipality, except special assessments for local improvements, shall be uniform upon all taxable property and persons within the limits of the municipality, and no property shall be exempt therefrom other than such property as may be exempt from taxation under the constitution and general laws of the State.

The state treats bottled water no differently from other food, so the city’s action of singling it out for a special tax may indeed run afoul of this state law. The lawsuit is expected to be filed sometime in January.

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