Water Tax

The Chicago City Council passed a 2008 revenue ordinance that in addition to some increases to existing taxes, adds a new "bottled water tax." This 5 cents per bottle tax applies to retail buyers and is collected by dealers and wholesalers starting January 1, 2008.

The tax is expected to raise $10.5 million (Sun Times, 11/14/07).

The tax was originally proposed at 25 cents per watter bottle by Alderman George Cardenes. The revenue was intended to address a shortfall in water and sewer funds believed to be partially due to people drinking less tap water. (CBS2, 8/14/07)

Is a bottled water tax a good idea?

If there are costs of using bottled water that are not included in the price that society ends up paying (negative externalities), then a tax helps to make the price of the item reflect the truer cost. There are costs to Chicago of bottled water. These apparently include a drop in funds for the tap water they produce. Undoubtedly, there are also disposal and recycling costs. Beyond Chicago, there are costs of the materials used to produce the bottles (including petroleum) and pollution costs involved with delivery.