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How Preckwinkle's pop tax backfired

Monday, September 25, 2017
Chicago Tribune
by Hal Dardick

When Cook County Board President Toni Preckwinkle first floated the idea of a pop tax to commissioners last October, a big part of her pitch was an appeal to their sense of self-preservation.

"We said to people, 'We're going to take one tough vote in the next three years, that's it. Then we're done,'" said Preckwinkle, making a reference to the financial stability the new money would bring. "And needless to say, that's very attractive when you have to run for election."

As political calculations go, this one backfired in a big way.

A botched rollout coupled with a huge public backlash fueled by general tax fatigue and the beverage industry's well-funded pushback campaign has made the pop tax the biggest issue in county government in nearly a decade.

Now a repeal vote is slated for next month, and several commissioners could find themselves fighting for their political lives next year. So could Preckwinkle, who a few months ago seemed like a shoo-in to win her third and final term despite pushing through the soda tax on top of a 1-percentage-point sales tax increase in 2015.

"It's really simple," said Commissioner Sean Morrison, a Palos Park Republican and the lead sponsor of the repeal measure. "It's going to come down to an up-or-down vote and, at the end of the day, the residents are tellin' 'em 'Can the tax or can the commissioner.'"

Warning signs

Approval of the soda tax was not a slam-dunk. Even before Preckwinkle publicly unveiled the penny-per-ounce charge on Oct. 13, the whispers had started at the County Building, and opponents went up with TV and radio ads opposing it.

But Preckwinkle sweetened the deal by giving each commissioner control over $500,000 in gas tax revenue to spend on transportation projects in their districts. She also rallied public health advocates to point out that downing fewer Mountain Dews could lead to a drop in obesity and diabetes.

Commissioners deadlocked, and Preckwinkle cast a rare, tie-breaking vote to impose the tax. If it hadn't gone as smoothly as Preckwinkle hoped, at least the new tax had passed, the budget was balanced and the heat was mostly on her.

Then it all started to unravel.

While the vote was taken in November 2016, providing plenty of distance from the March 2018 primary election, the tax wasn't scheduled to take effect until July 1.

The vagaries of federal law, the Illinois Constitution and state statutes meant it took months to come up with the rules of how the tax would be put in place, and changes were still being made late in the game.

For example, county officials at one point planned to tax low-income folks receiving Supplemental Nutrition Assistance Program benefits, but the state later told them that could not be done.

For weeks, reporters warned the public the tax was about to take effect. A few days before July 1, merchants sued to block the tax.

That raised the public focus on the issue. Preckwinkle called for laying off hundreds of county workers if a judge tossed the pop tax, even as county taxpayers stocked up on Coke and Pepsi while hoping for a reprieve.

Preckwinkle prevailed in court and, when the tax went into effect Aug. 2, both retailers and their customers were confused about what drinks should be taxed. That, in turn, triggered more lawsuits that stoked the negative headlines and consumer frustration.

While the tax was meant to apply to all sugar- and artificially sweetened beverages, pop drinkers demanded to know why diet beverages were hit. The rules also meant that some restaurants taxed free refills, which diners found particularly irksome.

In Philadelphia, a soda tax was applied to distributors, meaning it didn't show up on store receipts. But here, county officials said the Illinois Department of Revenue ruled the pop tax had to be applied at the cash register. And so store owners opted to list the new tax on receipts, a reminder to consumers that the case of soda they'd purchased now cost an additional $2.88.

"From messaging to implementation to rollout, anything that could go wrong with this tax did go wrong," said Commissioner John Fritchey, a Chicago Democrat and co-sponsor of the repeal ordinance.

Political fallout

County government hasn't seen such a backlash since 2009, when then-Board President Todd Stroger pushed through a 1 percentage-point sales tax increase. The furor eventually led to its repeal and helped topple Stroger from office. Preckwinkle defeated him by promising to repeal the half-percent that remained. She did so, but after winning re-election, she reinstated the sales tax increase as a way to pay for vastly underfunded county worker pensions.

The sales tax flip-flop, however, did not result in anywhere near the furor Preckwinkle faces over the soda tax.

Unlike during the Stroger era, the anger this time is not just directed at the county board president. Some commissioners who voted for the pop tax are in the political crosshairs too. If the issue provided fertile ground for would-be challengers, a run for office was made all the more appealing by the promise of campaign money from the beverage industry and retailers that have made repeal their core mission.

For longtime Chicagoans, the politics involved are akin to the 2007 city elections. Back then, well-funded labor unions started targeting aldermen over then-Mayor Richard M. Daley's veto of an ordinance requiring higher wages for big-box retailers like Wal-Mart. Daley held on to his power, but some aldermen lost their seats.

Since then, unions have only increased their role in picking City Council winners and losers, but whether the beverage industry and retailers stay in the game for the long haul at the county level could depend on what happens with the repeal vote. And overturning the tax next month remains the immediate focus of the interests opposed to it.

Even before the repeal vote takes place, the campaign cash is beginning to amass. Coca-Cola North America, Great Lakes Coca-Cola, PepsiCo Inc. and Dr Pepper Snapple Group have poured $111,000 into the Citizens for a More Affordable Cook County Political Action Committee, which has pledged to back commissioners who support repealing the tax. Each of those companies gave the maximum allowed under state law for the 2018 election cycle.

There's also the recently formed Government Accountability PAC, an independent expenditure committee. Formed by the Illinois Manufacturers Association, the fund plans to spend money to unseat backers of the tax. Contributions to that type of committee are not limited, but they can't give directly to a candidate or coordinate efforts with individual campaign organizations.

All of that comes on top of a $3.2 million–plus TV, radio and internet ad campaign advocating repeal paid for by the American Beverage Association. Those ads are running in the name of the Can the Tax Coalition, a group whose members include the beverage industry, grocers, retailers and unionized workers, that has been waging a monthslong repeal campaign.

In Springfield, some potentially vulnerable Democrats are sponsoring a bill to kill the pop tax, a way to dive for some political cover. The measure hasn't gone anywhere yet and comes after lawmakers approved their own major income tax increase in July. Mayor Rahm Emanuel also has passed a series of property tax hikes at City Hall and Chicago Public Schools, and all of it contributes to a sense of tax fatigue among voters headed into the 2018 elections.

In hindsight

The pop tax vote carried some political risk, so to provide a measure of cover, commissioners also passed an ordinance last November barring further sales tax increases, or property tax increases beyond the rate of inflation, before 2020.

Hindsight, of course, is always 20/20, but one commissioner said it's clear last fall's political calculation failed.

"I was happy we passed the moratorium on taxes, but it really didn't work, did it?" said veteran Commissioner Peter Silvestri, an Elmwood Park Republican who voted against the soda tax. "It's probably one of the biggest issues I've dealt with since I've been there. Luckily, I'm on the right side of the issue, so that helps."

Preckwinkle, meanwhile, said she was caught a bit off guard by the ferocity of the anti-pop tax campaign.

"I've been surprised by the level of anger that's been directed not just at me but also the commissioners who took this courageous vote to support our public health and public safety services," Preckwinkle told the Chicago Tribune in a recent interview.

"For the last year, Big Soda has been running an attack campaign against those of us who supported the sweetened-beverage tax," Preckwinkle added. "It hasn't stopped. It didn't stop in November. They've just been continuing on."

Preckwinkle said that reality led her to ask for help from former New York Mayor Michael Bloomberg. The longtime advocate for reduced sugar consumption spent $1 million on TV spots last year to back passage of the pop tax and committed another $5 million to ads this fall. A spokesman recently said the billionaire media empire owner would spend "whatever it takes" to defend pro-tax commissioners in the upcoming elections.

"I don't have a personal fortune," Preckwinkle said. "And although I try hard to consistently raise money to support myself and good candidates, it wasn't nearly enough to take on Big Soda."

Messaging

Commissioner Larry Suffredin, an Evanston Democrat who backs the pop tax, said that all the outside money means commissioners and local retailers have lost control of the message surrounding the debate.

"Each has a different message," said Suffredin, who noted Bloomberg is waging a public health battle while the beverage industry has made Cook County, the largest jurisdiction in the country to enact a pop tax, a primary political battleground. "They're having a war at 30,000 feet, and it's confusing people on the ground."

"What happens is you lose control of the messaging about what's being said about your tax," added Suffredin, who said it was primarily about raising money and only secondarily about the public health benefits. "We didn't impose this tax to have it diminish to zero. We imposed this tax to balance the budget, to make pension payments, to provide the services."

Preckwinkle said she could not get commissioners to support a property tax increase, which she said might have been a "fairer" way to bring in the more than $200 million a year the pop tax is expected to raise.

"First and foremost, we needed revenue," she said. "I never pretended otherwise."

At the same time, Preckwinkle has not been shy about promoting the tax as a public health benefit. There's a political reality there too. Championing the public health aspect brings her the support of groups like the American Medical Association and World Health Organization.

That leaves Preckwinkle pretty much on her own in explaining the need for additional county revenue. The task was made more difficult after she and commissioners in 2015 raised the sales tax, bringing in more than $400 million a year.

Preckwinkle has also put more money into roadbuilding while cutting the size of the county workforce and reducing overall debt. On the other hand, county workers' wages continue to rise under contracts Preckwinkle and nearly every commissioner approved, and she maintains further layoffs would damage vital services.

"I have said repeatedly that I'm going to try to run this government in a way that I don't leave it worse off than when I came, and that I'm not just passing obligations, and indebtedness and burden to my children and my grandchildren, who will hopefully continue to live in Chicago," said Preckwinkle, who lives in Hyde Park. "But that's not easy."

She pointed particularly at state government, which racked up $16 billion in bills during the record budget stalemate.

"It's an example of just hopelessly irresponsible leadership, and I'm getting the stuffing beat out of me for imposing a tax on sweetened beverages, which are terrible for people," Preckwinkle said. "It's a little annoying."

hdardick@chicagotribune.com

Twitter @ReporterHal



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