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Chicago Mayor Daley Scrounging for Loose Change Everywhere

2 min readBy: Gerald Prante

In what may be one of the strangest sets of 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. proposals put forth to fill a budget gap ever in public finance, Chicago Mayor Richard Daley has decided that he wants to raise property taxes in the city, as well as raise taxes and fees on selected products, including bottled water.

From the Chicago Tribune:

Mayor Richard Daley reached for bottled water to slake his thirst for new tax revenue Wednesday, proposing a 10-cent tariffTariffs are taxes imposed by one country on goods or services imported from another country. Tariffs are trade barriers that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers. on every bottle sold in the city.

That $1.25 water from a vending machine could soon cost $1.35. And a 24-pack of Aquafina, advertised for $4.50 at a local grocery chain, would cost $6.90 with the proposed tax, an increase of more than 50 percent.

With millions of water bottles drained each year across the city, the dime-per-bottle tax would add up to a projected $21 million, part of a $293 million package of new taxes, fees and fines proposed by Daley on Wednesday.

It makes no sense whatsoever to impose a special excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on bottled water for the purpose of raising revenue. If bottled water is harmful to the environment, then it should be done for that purpose regardless of budgetary concerns. As for raising parking fines, that too should not be done just to raise revenue. The purpose of fines is to deter illegal activity, and they should not be viewed as a cash cow like Daley is proposing and as the Virginia legislature recently enacted.

The same holds true for the proposed increase in alcohol taxes. The only reason alcohol should be subjected to a special tax is to correct for any negative externality imposed on society from its production or consumption. Alcohol taxes should not be raised merely so Mayor Daley can balance a budget. Furthermore, raising taxes on specific products too much can lead to either border activity, especially in a single city, or the sale of the product in the underground economy, with which the mayor’s family is no doubt familar.