Chicago Passes Bottled Water Tax

November 14, 2007

The Chicago City Council passed Mayor Daley’s budget yesterday, which included a five-cent tax per unit of bottled water sold in the city, in addition to a fairly large property tax 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 tax? 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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