Morning Spin: Cook County soda tax 'backlash' will make other tax hikes hard, ratings agency warns
Friday, October 20, 2017
by Hal Dardick
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The Cook County soda tax backlash and repeal could make it harder for the county, city and Chicago Public Schools to raise taxes or enact new ones, according to one Wall Street debt rating agency.
“The political backlash against the unpopular soda tax highlights the practical limitations on raising taxes, even if a government is legally permitted to do so,” Moody’s Investors Service analysts wrote in a report released Thursday. “This practical limitation is particularly critical for Chicago-area local governments, given the significant revenue needs of Cook County, the city of Chicago, CPS and other entities.”
Moody’s observation came a day after Mayor Rahm Emanuel proposed a 2018 city budget that includes a $1.10-per-month increase in the current $3.90 emergency communications fee that’s charged on every land line and cellphone billed to a city address. The mayor's proposal also includes a phased-in 20-cent increase to the current 52-cent tax on all trips using ride-sharing services like Uber and Lyft.
Some aldermen who will be called on to vote on those taxes have said the soda tax repeal was on their minds as they weighed the mayor’s proposal.
“This whole idea of revenue-generating ideas has to stop,” 12th Ward Ald. George Cardenas said after Emanuel gave his budget speech. “We have to sit down at a table and talk about cost-cutting ideas.”
The Moody’s analysis noted that after the repeal, the county is looking for ways to plug a resulting $200 million hole in County Board President Toni Preckwinkle’s 2018 budget proposal, concluding that budget cuts likely would be the answer.
The analysis also noted that there were “unique issues” surrounding the penny-an-ounce tax on sweetened beverages that’s now coming to an end Dec. 1. Those included the much-debated public health benefits of the tax, the hefty cost increases for the drinks and the troubled rollout of the tax.
“While these challenges would not apply to other types of tax increases, any future tax hikes in the wake of the soda tax repeal will likely be met with some political opposition, exacerbating budget pressures for Cook County and other area local governments,” the analysts wrote. (Hal Dardick)