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Taxing Tuesday: A Retrospective of Stupid Tax Policy - Soda taxes, Amazon tax, SALT cap
I'll never run out of stupid tax policy stories
In honor of the latest bill to pass through Congress, and especially to “celebrate” the upcoming expansion of the IRS labor force, I am going to walk through some of my favorite stupid taxes and revenue “enhancing” ideas from STUMP’s past.
The Cook County soda tax will always live in my heart
Of course, I have to lead with my sentimental favorite, the Cook County soda tax.
The Cook County soda tax had it all — sheer dishonesty in its motivation, piss-poor implementation, illegality in conflicts with federal welfare laws, pissing off everybody, ruining at least one major politician’s career — you name it.
I’m not going to link to all the STUMP posts in this saga (because there are a LOT) — you can find the comprehensive list in this post in December 2017: Pour One Out for the Cook County Soda Tax.
I just want to hit some points.
Nobody was ever fooled that it was about the children, an evil right-wing conspiracy, or whatever.
It’s all about money.
It usually is.
But by all means, attack fellow Democrats for being in the pocket of BIG SODA. I think that will be a fabulous tactic.
(I may not have your political interests in mind, Preckwinkle. Just in case it wasn’t clear.)
It wasn’t just the sheer dishonesty, but it also devolved into really bad politics.
Every single soda tax (and Cook County wasn’t the only one) is about increasing revenue. In some places, it was implemented in such a way that revenue was actually increased for the locality.
Let’s see what Cook County did.
First, they set the highest soda tax in the nation, and it was higher than the Illinois beer tax.
There were lawsuits galore surrounding the implementation. Walgreens mistakenly applied the taxes to unsweetened drinks — lawsuit! Retailers were ticked and sued; Cook County Commissioner Toni Preckwinkle was annoyed by said suing retailers and wanted to fine them or something. The way the tax was applied to people using federal benefits wasn’t right – against federal law! Lawsuit!
As you can imagine, this tax was popular with nobody. Politicians who had voted for this tax started scrambling away from it. People were going to lose their offices over it. I would argue this was one of the downfalls of Toni Preckwinkle, who next went on to run for Chicago mayor and lost to Lori Lightfoot (though she may now be happy she’s not running that mess. But then again, these pols aren’t entirely rational.)
But wait! There’s more!
Billionaire Bloomberg came in with his bucks to try to bolster the soda tax with some ads:
Did that convince you?
Let’s check the calories! I’m gonna have fun by just sticking to Coca-Cola products. You know they own Minute Maid, right? And you can’t get Bigger Soda than Coke! Obviously, fruit juice doesn’t have fat or protein, so all its calories come from eeeeevil sugar.
Apple juice: 15.2 fl. oz, 210 calories = 13.8 calories per oz
Orange juice: 11.5 fl oz, 160 calories = 13.9 calories per oz
Honest Kids juice drink: (based on grape, lemon, and cranberry juice) 6.75 fl oz, 40 cal = 5.9 cal per oz
And finally, regular old Coke: 12 fl oz, 140 calories = 11.7 calories per ounce.
So regular fruit juice is even worse calorie-wise than regular Coke.
If you check the nutritional info on the juices, sure, you get some vitamins, but in general kids and adults aren’t hurting for vitamin C (the most abundant for these juices) or even some of the other vitamins/minerals they contain. It’s better to eat whole fruit than fruit juices if you’re watching your weight. You get fiber and usually consume fewer calories in a single piece of fruit than in a glass of juice.
Speaking as a Person of Girth myself, (just call me a POG), I didn’t get fat on soda — I mean, I drink soda, but it’s seltzer. Just plain soda water with no flavor of any sort in it. I like the bubbles, I admit. I just like eating food, what can I say. I like meat and cheese. And wine.
I highly doubt that soda is the primary cause of obesity in America (no, Coke didn’t get to me. After all, I’m a Carolinas girl (Pepsi!), but if you ask, I’m more pro-RC Cola).
But let’s cut to the chase: the death of the Cook County soda tax, a sad day in American political history. In October 2017, the County Board had to tearfully put the tax to sleep.
When I saw the news come in:
County Board moves to kill pop tax
And then I had to crack open a drink:
[a canned version of a Dark & Stormy]
Ah, the traditional Bermudan drink: rum & ginger beer. Reading the can, the first ingredient is carbonated water, and the second is sugar. It comes even before the rum (third ingredient)!
You know, I never did find out if a drink like that would get hit with both a booze tax and a soda tax. Oh well.
The outrage from consumers wasn’t because of BIG SODA.
It’s because the tax was idiotic for loads of reasons. Consumers did not need prodding to hate this over-reaching tax. It was waaaay too high. Almost all tax revolts are because those they’re imposed on think the taxes are too high on the particular item being taxed.
The real story is public entities hitting a wall in terms of being able to tax more.
[sipping hotel coffee, very black, no sugar]
Wanting to tax more, but not being able to tax more, you say?
Let’s move on to the next stupid tax.
Amazon tax in Seattle
I loved this story of taxing overreach, though I think this one is like the vampire that keeps getting revived with a single drop of blood. Is it actually dead yet?
[read on, Macduff!]
I first noticed this stupidity in 2018, but I’m sure it started well before then.
AGAIN ON THE SEATTLE HEAD TAX
That golden goose needs to die! How dare it honk at us while we hold the axe!
‘We’re not yet halfway through 2018, but this year’s winner of the Chutzpah Award should probably go to Kshama Sawant, a member of the Seattle City Council. On Monday the city slapped large companies with a new employee head tax to address the city’s homelessness problem. Amazon employs more than 45,000 residents and will have to cough up millions for the privilege of doing so. It recently suspended construction on a new downtown office tower while the council deliberated.
‘Sawant called this “extortion.” This is a little bit like the guy who kills his parents and then pleads for mercy because he’s an orphan—only worse. It’s more like the guy who kills his parents and then accuses them of murdering him.’
So that’s where I noticed it started.
That was May, and in June 2018, they had to repeal that head tax:
After the very short-lived attempt of Seattle to tax Amazon by employee count, only to rescind it a month later… others think “Sure, it didn’t work in Seattle, but it will go over here!”
[eliding over a “google tax”]
Tax Foundation coverage: Seattle City Council Votes Overwhelmingly to Repeal New Business Head Tax
I don’t think any of these politicians learned a damn thing other than “you keep this in place, you are getting booted out in the next election.”
I actually have no issue with that sort of political action, but it does require voters paying attention.
Pay attention, voters. Tax policy, especially at the local level, has a tendency of biting people on the ass.
Because in September 2018, the politicians in June 2018 who had been forced to rescind their preferred policy basically said: we’re waiting for voters and taxpayers to stop paying attention:
SEATTLE: WE’LL TRY AGAIN WHEN PEOPLE AREN’T LOOKING
There are always entrants to the “dumbest tax idea”, but this one took the cake:
‘Seattle’s head tax is one for the annals of political regret. In May the City Council unanimously approved an annual tax of $250 per employee on any business with $20 million or more a year in revenue. A month later the Council repealed the tax 7-2 amid local and national ridicule. Now we’re learning how the politicians realized they had made a big mistake and scrambled to curb the damage—at least until it’s safe to try again.
‘The Seattle Times obtained the text conversations of Mayor Jenny Durkan and Councilwoman Lorena González on the weekend before the June 12 repeal vote. “Pulling the head tax down now is super super smart and strategic,” venture capitalist Nick Hanauer advised the mayor in a June 10 text. “This was a no-win fight. Wrong fight at the wrong time on the wrong terms.”’
And then in JUNE 2020, Seattle Returns to Its Dumbass Idea of an “Amazon Tax”
I wonder what was going on in June 2020.
Anyway, supposedly it’s worked out well for Seattle, according to this article in April 2022:
Business leaders expressed concern when lawmakers approved a new payroll tax in 2020 on Seattle’s largest companies, part of a longstanding effort to increase funding for affordable housing and homeless services.
Now that the controversial payroll tax, dubbed JumpStart Seattle, has been in effect for a full year, it’s possible to assess some of those claims.
JumpStart brought in $248.1 million in its first year — $48.1 million more than projected, a 24% jump. Its backers say that’s proof the tax is a success. Whether the extra funding comes at the cost of Seattle jobs or employers remains unclear.
Unlike the head tax, JumpStart targets payroll rather than headcount. It taxes salaries exceeding $150,000 per year at companies with annual payroll expenses of $7 million or higher. The tax rate varies, with the largest companies paying the most.
The extra $48.1 million will go toward replenishing Seattle’s reserves. The majority of the $200 million Seattle planned to collect will fund affordable housing projects in the city. About 20% will go toward environmental and economic development projects, including workforce training and childcare. Overall the city’s 2021 general fund revenue was $110 million higher than initially forecasted, including the $48.1 million generated by JumpStart.
For 2022, JumpStart is expected to bring in more than $277 million, according to the latest forecast numbers reported last month — $43.6 million beyond what was expected in November.
My only comment re: the extra revenue is that a lot of governments have been seeing extra revenue coming in for sales and income taxes.
Inflation may have something to do with it. Just a thought.
In any case, this is a “Let’s see how it works out for them” case. A payroll tax is less idiotic than a headcount tax (I mean, wtf, guys. HEADCOUNT?!) This is one I will need to revisit later.
SALT cap fights
This one sets me to belly laughs and nobody else seems to get the joke.
On a serious note, I think in the long-term, it would be best if SALT (state and local tax) deductibility for personal federal income taxes were set to zero, as it sets up some very perverse incentives in public finance.
On a less serious note, I really enjoy the internecine political fights in the Democratic Party this has set off since the 2017 TCJA (Tax Cuts and Jobs Act) set the SALT cap to $10,000 while raising the standard deduction so high, and marginal rates down, that the people whose taxes were raised by the change were not the most media-sympathetic.
There are a few Republican representatives and senators in areas that would have had high SALT deductions, but most of the places hard hit are all-Dem from the lowest level up to the governor. Republicans aren’t involved in the brou-ha-ha, other than setting up the situation to begin with. They simply point out the beneficiaries of the SALT deductions are very high income and/or high wealth — didn’t you people say you want to tax the rich? — and then just stand back.
The following list is not exhaustive – just a quick sampling of the various times Democratic representatives have tried threatening to block legislation if they didn’t get SALT cap relief (which has never happened, btw — and didn’t happen in this latest bill):
April 2021: SALT Cap Tussle: NY Democrats Have an Ultimatum
August 2021: Taxing Tuesday: The SALT Cap Battle Continues
That last one concerns all the “clever” tricks to get around the SALT cap. I don’t think many of them have worked thus far. I could be wrong. I am not a tax lawyer.
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Personal note: 5-year survival for Stu
I never thought I would get so much delight out of tax policy for the past 5 years, and yet here we are.
I have been covering “Taxing Tuesdays” for longer than 5 years on the original STUMP site, but the Cook County soda tax saga was in 2017, the SALT cap came in at the end of 2017, and the Seattle headcount tax in spring of 2018.
It’s incurable given current medical technology, but the “cancer load” is much less than it had been and it’s treated like a chronic condition. The survival rates are so much better than 20 years ago (and you don’t want to know what those were like for his diagnosis back then… I made the mistake of looking, but then made the good decision to look at the date those data were from…. and then decide not to look at those stats anymore.)
So thanks, stupid tax policy for helping give me a laugh through the bad times!