Illinois proposes a ‘Sugar Tax’ to potentially ease budget concerns

Aeriel Storey, Assistant Editor for Features

The Illinois General Assembly proposed a new tax on sugary drinks, such as soda, in a new bill proposed as the Sugar-Sweetened Beverage Tax Act.

This proposal, Senate Bill 9, will increase the cost of sugary drinks by one cent per ounce of nonalcoholic, sugar-sweetened beverages sold by a distributor to retailers in Illinois, which includes stores and restaurants that sell to consumers.

This tax increase on sugary drinks would increase the cost of such beverages for Illinois citizens. The proposal comes at a time when Illinois is seeing a large debt, owing more than $11 billion in unpaid obligations, according to Small Business Trends, and going without a budget for almost a year.

The hope for this tax increase on sugar-sweetened beverages is that it will provide Illinois lawmakers with more funds to alleviate the current state debt.

The Governor’s Office of Management and Budget has released a statement that Senate Bill 9, which includes the sugar-sweetened beverage tax and other tax changes, will increase revenues by $5.4 billion in the state’s fiscal year running from July 1, 2017, through June 30, 2018, and that there will still be a deficit of $2.3 billion for that year.

Sugar taxes are hotly debated in regards to the effect they have on the economy, if their effectiveness , and their impacts on low-income citizens. Though other areas, such as Philadelphia, have enacted similar taxation on sugary drinks, there has not been enough evidence to provide economists with solid figures regarding the economic impacts.

With so much instability in the Illinois budget, this additional taxation is seen by some as risky; while the tax may help the state pay overdue bills or continue current programs, it may reduce the sales of such beverages, and many economists are unsure of its effects. It may also negatively impact low-income individuals.

As Paul Caselton, visiting associate professor in accountancy at UIS, said, “It is commonly accepted that low-income individuals spend a greater percentage of their income on consumption than higher-income individuals spend, and so low-income individuals pay a higher percentage of their income in taxes on consumer goods than higher-income individuals pay.”

He continued, “I do not know of any studies that indicate the extent to which this would be true for the proposed tax.”

This tax could affect students attending UIS and other state colleges and universities. Prices on sugary drinks may go up, despite the current high costs of purchasing such beverages. It may also impact the decisions students make when choosing food or spending money at restaurants within the state.

Additionally, the addition of this tax could exacerbate health disparities among social classes.

According to a case study from U.S. National Library of Medicine, higher-income households spent more money on both healthy and less healthy foods from a wide range of sources while lower-income households spend a larger proportion of their money on carry-out, and a larger proportion of their home beverage purchases were sugar sweetened beverages due to the limited availability of sources to purchase from.

The effects could be detrimental to lower-income households and those facing poverty who struggle to afford food.

Implementing this tax is an action that the Illinois government hopes will improve the state of the economy, but little is known from its effects, leaving many wondering what will happen as a result.

While some are in favor of this additional tax, some are wary of its implications and believe there are better, more effective options.

Caselton explained, “I believe that increases in the rates of existing taxes or removing exemptions from existing taxes are generally preferable to creating new taxes because of the costs involved in administering and complying with new taxes.”

If enacted, Senate Bill 9 would be effective March 1, 2017.