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Chicago's Take-out Tax

Posted on 08/07/2007 19:32:45 | Link | Post Comment

Last Thursday morning, as I was waiting for my flight from O'Hare to Austin, I bought an Egg McMuffin.

Now I'm not a big fan of Mickey D's burgers, but I do like his breakfast sandwiches and especially his hash browns. They're sort of like rectangular Tater Tots.

So I was thrilled when I saw those golden arches on the airport concourse, especially since I'd already been up for several hours getting packed, checked out of the hotel and shuttling to the airport, all without a morning meal.

But when I toted up my travel expenses from last week's trip to the IRS Tax Forum in Chicago (as a representative of the Taxpayer Advocacy Panel), I noticed an interesting notation on my McDonald's receipt: A take-out tax.

A few punches of my calculator and I found that it was 10.45 percent of my McMuffin meal deal.

At that level, I'm figuring the tax I paid for my fast-food breakfast wasn't just for anti-littering efforts, but included all the sales taxes -- Illinois state and various local ones -- that apply to this type of food purchase.

Early battle to enact the tax: I remember when this tax, or perhaps a similar forerunner, was enacted in 2000 it had to face some legal challenges. It was hailed as an anti-littering tax that would help clean up city streets.

But back then, two Windy City restaurateurs, supported by the Illinois Restaurant Association, filed a lawsuit claiming the ordinance was not evenly enforced. As originally formulated, the bill exempted carryout food sold by establishments from the 1/2 percent tax if they had no on-premises seating. So street vendors, which allow diners to grab and go and presumably dump their leftovers as they walk, were not taxed under the initial plan.

The state court judge who heard the case called this particular exemption a "glaring shortcoming" because "such businesses are the most likely to contribute to the litter problems that the ordinance is allegedly attempting to ameliorate."

Judging from my receipt, Chicago officials came up with a way to satisfy legal experts, if not the fast-food public. That or the O'Hare McDonald's I patronized is using out-of-date cash register software.

Opponents of litter and anti-litter taxes: The Container Recycling Institute has more on anti-litter taxes. Of course, this group has a vested interest in other anti-litter efforts, but it still makes some valid points.

The biggest argument against such taxes is that they do not provide a disincentive to litter. Because they are passed on to consumers in the price of goods, buyers typically don't know they are paying them. Even if they notice the extra charge, it's not always clear (like it was on my receipt) what the tax is for.

More to the point, anti-litter taxes don't target just those who dump garbage on public streets. Those folks are the ones, in an ideal world, who would be paying for their disgusting habit. But the fact is that many folks who are conscientious about not littering also pay the price.

Anti-litter taxes piling up: Despite many good arguments against such taxes, lawmakers still like them.

Last year, Oakland, Calif., officials enacted a measure aimed specifically at the city's fast-food restaurants. It requires the establishments to pay a fee of $2,400 to hire crews to pick up garbage around town. Fast-food restaurants were specifically cited because a study showed their products account for 20-percent of Oakland's litter.

Other anti-litter efforts target beverage bottles and cans; these have been around for decades. Newer laws are trying to end the wanton disposal of the ubiquitous plastic grocery bag; TaxProf has a list of the latest worldwide efforts in this fight.

And don't be surprised to one day see a new cigarette tax or a hike in existing tobacco taxes that's designated to clean up smoking-related litter.

Fix the real reason: While the intentions in all these cases might be good, the myriad proposals are simply scattered efforts to treat symptoms, not the root cause.

Litter is social behavior problem, and is not specific to any one material or product.

Until we can find a way to make people realize the financial, aesthetic, environmental and health consequences of their disgusting habit, all the taxes in the world will not eliminate tossed trash.

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