Illinois Judge halts sugary soda drink tax with temporary restraining order

Cook County, Illinois was supposed to join the parade of localities (that started in Berkeley, of course) taxing sugary soft drinks today, but thanks to a temporary restraining order issued by Circuit Judge Daniel Kubasiak, shoppers in Chicago and surrounding suburbs can guzzle as much Pepsi and Coke as they wish, without paying a penny per ounce special tax. 

The basis of the lawsuit that led to the TRO is quite intriguing. Becky Yurak reports in the Chicago Tribune:

The ruling by Circuit Judge Daniel Kubasiak to grant a temporary restraining order came days after the Illinois Retail Merchants Association and several grocers filed a lawsuit against the Cook County Department of Revenue seeking to block the tax, which they argue is unconstitutional and too vague. (snip)

The retailers have argued that, under the Illinois Constitution, similar objects should be taxed uniformly. Under the sweetened beverage tax, drinks in a bottle or from a fountain machine are taxable. But on-demand, custom-sweetened beverages, such as those mixed by a server or barista, aren't subject to the tax. Also exempt: purchases made with food stamps.

If the purpose of law is to fight obesity, why the exemptions? And why is fruit juice, which is naturally sweetened, exempt, while sweetened beverages are not? And why are food stamp recipients exempt from the sugary drink tax? If there is any excuse for a nanny state deciding which items of consumption are to be discouraged, it would be among people that the taxpayers are subsidizing. And the fact is that poor people have a far more serious obesity problem than the affluent. As the New York Times reported:

The United States Department of Agriculture, which oversees the $74 billion food stamp program called SNAP, has published a detailed report that provides a glimpse into the shopping cart of the typical household that receives food stamps.

The findings show that the No. 1 purchases by SNAP households are soft drinks, which accounted for 5 percent of the dollars they spent on food. The category of ‘sweetened beverages,’ which includes soft drinks, fruit juices, energy drinks and sweetened teas, accounted for almost 10 percent of the dollars they spent on food. “In this sense, SNAP is a multibillion-dollar taxpayer subsidy of the soda industry,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “It’s pretty shocking.”

The restraining order put a temporary halt to rushed preparations by retailers:

Preparing for the soda tax has been a time-consuming process for Chicago grocery chain Pete's Fresh Market, which was still testing the tax's implementation on its check-out system Friday afternoon when word of the judge's ruling came down.

"It's a relief," said Vanessa Dremonas, executive officer for the family-owned chain, which has 11 of its 12 stores in Cook County.

Dremonas said getting ready for the tax on the eve of the busy July 4 weekend was "a little tricky," but not implementing it will be relatively easy. "It's all set up and ready to go, but we needed to push it through for (Saturday). So we just won't push it through," she said.

Getting ready for the soda tax required more than updating the checkout system, Dremonas said, citing a "trickle down" effect that touched everything from signage and advertising to Instacart grocery delivery.

The argument in favor of the TRO was that if the tax is held to be unconstitutional, there would be no way to identify consumers due a refund, That the judge bought this indicates he sees a genuine possibility that the tax will be held unconstitutionally vague.

David Ruskin, the lawyer representing the retailers, told the judge at a Thursday hearing that a temporary restraining order was needed because there currently isn't a system in place for the thousands of consumers who would be due refunds, should the tax be found to be unconstitutional. That would make retailers vulnerable to class-action lawsuits by consumers.

The county had argued that if the tax is found unconstitutional, dollars collected could be refunded — which means that there would be no irreparable harm.

But it was the retailers' argument, not the county's, that appeared to resonate with the judge.

We’ll see where this goes. I am no fan of so-called “sugary” drinks that actually use high fructose corn syrup as a sweetener because the price of sugar in the United States is roughly double the world market price, thanks to protectionism of our domestic sugar industry. That's why I see people at Costco stocking up with cases of Mexican Coca-Cola, which is made with real sugar. And I am agnostic on the relative effects of HFCS versus sugar, versus natural fruit sugars in juices.

But in the end, it is all about the money, and Illinois, which is going broke and raising taxes bigly, wants any excuse to tax anything at every level of government:

 Next year, the county had planned to collect $200.6 million from the tax. Without that money, significant spending cuts would be likely — unless the county raised other taxes or fees.

One tax they will never consider: a tax on organic food.

Hat tip: Peter von Buol

Cook County, Illinois was supposed to join the parade of localities (that started in Berkeley, of course) taxing sugary soft drinks today, but thanks to a temporary restraining order issued by Circuit Judge Daniel Kubasiak, shoppers in Chicago and surrounding suburbs can guzzle as much Pepsi and Coke as they wish, without paying a penny per ounce special tax. 

The basis of the lawsuit that led to the TRO is quite intriguing. Becky Yurak reports in the Chicago Tribune:

The ruling by Circuit Judge Daniel Kubasiak to grant a temporary restraining order came days after the Illinois Retail Merchants Association and several grocers filed a lawsuit against the Cook County Department of Revenue seeking to block the tax, which they argue is unconstitutional and too vague. (snip)

The retailers have argued that, under the Illinois Constitution, similar objects should be taxed uniformly. Under the sweetened beverage tax, drinks in a bottle or from a fountain machine are taxable. But on-demand, custom-sweetened beverages, such as those mixed by a server or barista, aren't subject to the tax. Also exempt: purchases made with food stamps.

If the purpose of law is to fight obesity, why the exemptions? And why is fruit juice, which is naturally sweetened, exempt, while sweetened beverages are not? And why are food stamp recipients exempt from the sugary drink tax? If there is any excuse for a nanny state deciding which items of consumption are to be discouraged, it would be among people that the taxpayers are subsidizing. And the fact is that poor people have a far more serious obesity problem than the affluent. As the New York Times reported:

The United States Department of Agriculture, which oversees the $74 billion food stamp program called SNAP, has published a detailed report that provides a glimpse into the shopping cart of the typical household that receives food stamps.

The findings show that the No. 1 purchases by SNAP households are soft drinks, which accounted for 5 percent of the dollars they spent on food. The category of ‘sweetened beverages,’ which includes soft drinks, fruit juices, energy drinks and sweetened teas, accounted for almost 10 percent of the dollars they spent on food. “In this sense, SNAP is a multibillion-dollar taxpayer subsidy of the soda industry,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “It’s pretty shocking.”

The restraining order put a temporary halt to rushed preparations by retailers:

Preparing for the soda tax has been a time-consuming process for Chicago grocery chain Pete's Fresh Market, which was still testing the tax's implementation on its check-out system Friday afternoon when word of the judge's ruling came down.

"It's a relief," said Vanessa Dremonas, executive officer for the family-owned chain, which has 11 of its 12 stores in Cook County.

Dremonas said getting ready for the tax on the eve of the busy July 4 weekend was "a little tricky," but not implementing it will be relatively easy. "It's all set up and ready to go, but we needed to push it through for (Saturday). So we just won't push it through," she said.

Getting ready for the soda tax required more than updating the checkout system, Dremonas said, citing a "trickle down" effect that touched everything from signage and advertising to Instacart grocery delivery.

The argument in favor of the TRO was that if the tax is held to be unconstitutional, there would be no way to identify consumers due a refund, That the judge bought this indicates he sees a genuine possibility that the tax will be held unconstitutionally vague.

David Ruskin, the lawyer representing the retailers, told the judge at a Thursday hearing that a temporary restraining order was needed because there currently isn't a system in place for the thousands of consumers who would be due refunds, should the tax be found to be unconstitutional. That would make retailers vulnerable to class-action lawsuits by consumers.

The county had argued that if the tax is found unconstitutional, dollars collected could be refunded — which means that there would be no irreparable harm.

But it was the retailers' argument, not the county's, that appeared to resonate with the judge.

We’ll see where this goes. I am no fan of so-called “sugary” drinks that actually use high fructose corn syrup as a sweetener because the price of sugar in the United States is roughly double the world market price, thanks to protectionism of our domestic sugar industry. That's why I see people at Costco stocking up with cases of Mexican Coca-Cola, which is made with real sugar. And I am agnostic on the relative effects of HFCS versus sugar, versus natural fruit sugars in juices.

But in the end, it is all about the money, and Illinois, which is going broke and raising taxes bigly, wants any excuse to tax anything at every level of government:

 Next year, the county had planned to collect $200.6 million from the tax. Without that money, significant spending cuts would be likely — unless the county raised other taxes or fees.

One tax they will never consider: a tax on organic food.

Hat tip: Peter von Buol

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