Beverage industry to fight Chicago tax

A coalition of beverage industry trade groups plans to challenge a tax on water bottles by the city of Chicago that is scheduled to take effect on Jan. 1.

The American Beverage Association, the International Bottled Water Association, the Illinois Retail Merchants Association and the Illinois Food Retailers Association are challenging the law, which would place a 5-cent tax on every bottle of water purchased in the city.

In the past few days, newspapers and TV stations in Chicago have done stories on how consumers plan to buy bottled water in the suburbs to avoid the tax. Opponents of the tax say it is illegal, and that it will hurt retailers in the city. Dave Vite, CEO of the Illinois Retail Merchants Association, told the Chicago Tribune: "People are already leaving the city when it comes to gas, alcohol and cigarettes. This will affect anybody that sells bottled water, because when customers do migrate, they take other business with them."

Chicago Mayor Richard M. Daley proposed the tax to help the city government erase a budget deficit -- but the proposal may have gained traction because of growing criticism of the environmental impact of the bottled water industry.

If the lawsuit doesn't put a stop to Chicago's tax, expect other cities to try the same trick.