Bar Owners and Alders Oppose Chicago’s Alcohol Tax Hike Proposal

As Mayor Brandon Johnson searches in the couch cushions for revenue to shore up the city’s nearly billion-dollar budget deficit, his administration has proposed raising taxes on beer, liquor, and wine sales between 34 to 36 percent per gallon. But leaders from Chicago’s bar and restaurant industry argue those tax hikes are untenable while business owners are still struggling with rising costs inflicted upon them since the pandemic.

“Our margins are already razor thin and further tax of those margins would put us in a difficult position,” Damon Patton, co-founder of the Black-owned brewery Moor’s Brewing, said Wednesday morning during a November 20 rally against the proposed tax hike. “You need a lot of volume to make money in this business and a tax hike would definitely hinder that progress.”

The proposed increases to wholesale transaction prices per gallon would include a 34 percent increase for beer, a 36 percent increase for liquors other than beer with less than 14 percent ABV, a 34 percent for liquors between 14 and 20 percent ABV, and a 35 percent increase for liquor with a content of more than 20 percent ABV. Although the tax is levied on wholesalers, the excise tax can filter down from retailers to consumers.

Though most businesses could pass the cost of the tax onto consumers, it’s difficult to quantify how much it would change the cost of a cocktail or beer at a bar.

“It’s not a one-to-one kind of comparison,” City Comptroller Chasse Rehwinkel says. “The taxes are assessed on the wholesaler level. So it’s not necessarily appropriate to just state what would it be on the restaurant itself.”

Assuming the tax is passed directly onto the consumer, a 16-ounce can of beer could increase by 1.25 cents, Rehwinkel adds.

When calculating the potential revenue that the tax would bring, Rehwinkel noted that the mayor’s budget office factored in behavioral changes that could come with the increase. When a government levies a “sin tax” on products that are viewed as harmful to society like alcohol, sugar, or cigarettes, the tax can discourage consumers from buying them and then decrease the revenue the government collects.

The mayor’s budget office has stated the change would mark the first increase to the tax in 16 years and could bring in $10.6 million in revenue. Johnson says the increase would be “modest,” according to the Tribune.

The Illinois Retail Merchants Association, the Hospitality Business Association of Chicago, and about half a dozen bar and restaurant owners rallied at the press conference held Wednesday morning at Haymarket Brewing & Pub in the West Loop. The coalition argued they would refuse to negotiate with the city on the proposed increase. Teamsters Local No. 710 — which includes truck drivers who deliver wholesale beer, wine, and spirits — also joined in their opposition against the increase.

“We will fight it to all levels,” says Pat Doerr, director at the Hospitality Business Association of Chicago. “We have done our part for the city coffers over the last four years and there was not a point we could agree on in between on this after what we’ve paid in the past. We’re good earners for the city. We’ve earned enough and we need to break.”

On Wednesday, November 14, the City Council unanimously rejected Johnson’s $300 million property tax increase. That means the mayor must find other sources of revenue or enough cuts that would balance the city’s budget. Yet bar and restaurant owners say the city has already balanced its checkbook on the backs of their industry. Johnson’s latest proposal follows his administration’s expansion of paid leave and increases to the tipped minimum wage. Both ordinances notched wins for the progressive caucus and were fiercely opposed by the restaurant lobby.

Doerr pointed to the recent closure of Revolution Brewing’s Logan Square brewpub, as an example of a successful business with multiple locations that still couldn’t cut it under current economic conditions. Mark Robertson, co-owner of 2Bears Tavern Group — which includes Meeting House Tavern and SoFo Tap — tells reporters that if the tax increase forces them to raise their prices, fewer people will walk into their bars.

“Less customers who do come in are spending less. They’re trading down from the local craft beer that by nature cost more for the Miller Lite. They’re making choices to tip our employees less,” Roberston says. “What used to be able to support a larger staff, we’ve had to reduce our staff count by 15 percent in the last four months to compensate for these costs that we’re getting hit with. It simply doesn’t work.”

Doerr claims he has at least 25 alders who would oppose the measure, just one vote short of the number needed to kill the tax. Most of those votes would likely come from alders in border wards who worry that the tax hike will drive customers and business to the suburbs. On Wednesday, four alders echoed those concerns to Eater Chicago.

“We’re still looking and reviewing everything,” says 9th Ward Ald. Anthony Beale. “But I can tell you that that is not a popular tax that is going over well amongst me and my colleagues because we are on border awards. We already have people going to Indiana, going across the border for cigarettes and they’ll just go across the border for their liquor as well.”

10th Ward Ald. Peter Chico worries customers and businesses will head to Indiana as his ward borders the state: “Those obstacles will always be in place in the 10th Ward and somebody has to manage and deal with it.”

19th Ward Ald. Matt O’Shea, whose district borders the South Suburbs, expressed confidence that the City Council could remove the tax hike plan from the budget. In addition to his conversations with the merchant and restaurant associations, O’Shea spoke with bar and tavern owners.

“Those neighboring suburbs that border the 19th Ward have much less restrictive legislation. They actively recruit my businesses, particularly my restaurants, my taverns,” he says. “Most importantly, I’ve talked to the small business owners in my community, some of whom didn’t even realize that this was on the table. And universally they have said, Matt, that would be crushing to us.”

O’Shea and other alders argue the Johnson administration hasn’t tried hard enough to find efficiencies in their budget. Many of the proposed cuts have proved controversial — such as slashes to the staff that implement court-ordered reforms to the Chicago Police Department.

“That’s one of the philosophical differences that you’re starting to see emerge here,” says 13th Ward Ald. Marty Quinn. “Is that everything’s about growing more revenue when we should be looking at reforms.”