“Raising taxes in response to this economic downturn ignores twelve years of Connecticut’s economic and fiscal history – and will only chop any chance of recovery off at the knees. Connecticut now has an opportunity to gain wealthy residents fleeing New York City and thereby increase its high-income tax base. ...
The soda tax comes to Connecticut
Following a move that proved disastrous for independent grocers in Philadelphia, some Connecticut lawmakers and organizations are looking to institute a 1 cent per ounce tax on all sweetened beverages including soda and sports drinks like Gatorade.
Proponents claim this new excise tax will reduce consumption of high-calorie drinks and bring in an estimated $85 million, which would be used to fund the Care4Kids program. Care4Kids is currently unable to take on new children due to Connecticut’s budget problems.
However both supporters and opponents agree that the tax – much like the grocery bag tax – will affect lower income families the most.
Gwen Pastor, policy analyst for the Connecticut Association of Human Services, wrote in her testimony to the committee of finance, revenue and bonding that, “we recognize this is a regressive tax and may impact lower-income families more than others. However, the negative health outcomes from sugary drinks are also regressive and disproportionately impact these same families.”
Some lawmakers were skeptical of the revenue estimates and the ability for the state of Connecticut to maintain earmarked funds for particular programs.
Gail Lavielle, R-Wilton, compared the planned funding of Care4Kids to the tobacco settlement money which was supposed to be used to educate the public on the danger of smoking. The tobacco settlement fund has been raided several times by the legislature to balance budgets.
“I’m very troubled, though, that much of what we’ve set aside for the same purpose with tobacco taxes have simply not been used for that purpose,” Lavielle said.
Projected revenue from the proposed tax could be overly optimistic and may be offset by other losses. Following Philadelphia’s similar tax, grocers reported overall revenue down 10 to 15 percent as people left the city to buy soda in the suburbs.
Although leaving the state to purchase soda isn’t as easy as leaving a city, Connecticut has faced other issues involving drinks and cross-border shopping.
Gov. Dannel Malloy has repeatedly tried to end the minimum liquor bottle pricing in Connecticut claiming it was driving consumers to purchase cheaper alcoholic beverages in places like Massachusetts, New York and Rhode Island.
The governor’s office believes that ending minimum bottle pricing would prevent people from purchasing liquor across state borders and bring in an additional $5 million per year.
But there could be an adverse effect on jobs if the soda tax in enacted, particularly in distribution centers if consumption drops off quickly or people buy their drinks elsewhere.
Following the soda tax in Philadelphia, Pepsi stopped selling 2-liter bottles and 12-packs of its products within city limits and laid off 80-100 workers from local distribution centers.
The American Beverage Association pointed out to lawmakers that the beverage industry supplies 2,645 jobs in the state and annual tax revenue totaling $171.7 million per year.
The Grocery Manufacturer’s Associations also opposed the bill saying these taxes had an “unproven effect” on obesity rates and that lower consumption would result in lower-than-expected revenues.
Excise taxes are meant to drive down usage of a particular product and have been used most notably on cigarettes but the effectiveness in changing people’s habits have been in dispute. The National Bureau of Economic Research found tobacco taxes had “small and not usually statistically significant” effects on tobacco usage.
What has proven more effective in reducing habits which cause disease have been public information campaigns and media coverage of issues surrounding tobacco use or sugar consumption.
Dr. David Katz, director of the Yale-Griffin Prevention Research Center, acknowledged that the effects of sugar are “well known” and that soda consumption has decline in recent years.
“Any one not living under a rock has heard that we consume too much sugar, sugar is bad for you, these are established facts of modern living,” Katz said. “The intent here is to essentially level the playing field so that those populations that are the last to get on board and the most harmed by excesses of sugar can be beneficiaries of that trend as well.”
But Yankee Institute assistant policy director, Joe Horvath, said it was just another tax that would disproportionately affect lower income consumers.
“If some had their way we would raise the bottle deposit, add a tax to the sweetened beverage you want to take out of the grocery store and then tax you on the bag you carried it out with,” Horvath said. “I’m sorry, but that’s crazy.”
**UPDATE: Gov. Lamont issued an executive order at approximately 8:30 p.m. on May 13 extending the suspension of the plastic bag tax until June 30. Executive Order 7NN can be viewed here. Yankee’s original article pointing out the tax would begin again on May 15 was published at noon on ...