That 20 oz bottle of Pepsi could soon cost you an extra 20 cents— that’s if Gov. David Paterson’s proposed sugar-drink tax is approved.
A controversial tax of one-cent tax per ounce on sugared drinks is in Paterson’s proposed state budget. The tax means a 2-liter bottle of Coke would cost about $2.38, up 68 cents from the current price of $1.70. A 16 oz. bottle of Coke would be $1.15 compared to its current price of 99 cents.
Paterson and groups like the Alliance for a Healthier New York support the proposed tax because they expect it to shrink the state’s $90-billion deficit and to help New Yorker’s health, say government officials.
“The state’s in a severe fiscal crisis,” said Matt Anderson, a spokesperson for the New York state budget office. “And this tax will help New York health care costs. We believe this proposal will decrease the consumption of drinks related to obesity and diabetes.”
Opponents include the New York Association of Convenience Stores and other members of New Yorkers Against Unfair Taxes. They argue that the because it will drive away business, charge customers too much for sugared drinks and it could open the doors for more taxes.
“It’s going to hurt our customers and drive business away,” said Jim Calvin, the president of the New York Association of Convenience Stores. He added, “Most of our customers consume in moderation. We don’t understand why these consumers should have to pay more.”
The tax would work two ways: If the sugared drink is made in New York, then the tax would be applied to the syrup or powder as it was brought into the state. If the drink is made in another state, then the tax would be on the final product when it is sold. Either way, the customer will pay the tax in the end because it will “pass down the supply chain,” said Anderson, spokesperson for the New York state budget office.
It would apply to any drink that has at least 10 calories per eight ounces. This includes soda, sports drinks, energy drinks, bottled coffee or tea. It also includes fruit and vegetable drinks containing less than 70 percent of real fruit juice. Milk, milk products and baby formula won’t be taxed, even though they too have sugar.
The tax still needs approval from the state assembly and senate, where it faces stiff opposition from some business groups. Last year, Paterson withdrew a similar tax before it went to a vote.
If approved, the tax is expected to go into effect on June 1, 2010, said Anderson, state budget office spokesperson. The deadline for the legislature to pass the state budget is April 1, but lawmakers seldom meet that deadline.
The tax on sugared drinks is expected to generate $450 million for the state in 2010 and about $1 billion a year after that, according to the budget office. The governor pledges the revenues will be used only for health care. New York spends about $8 billion on health care a year, said Anderson. “Without this proposal, we would have to consider cuts to hospitals and home care providers,” he said.
In hopes of winning more votes, the latest tax proposal changes how the tax will be collected. Last year’s failed tax called for an 18-percent sales tax that consumers paid at the check-out register. This year’s version puts the tax onto the producers, so it will already be factored into the price of the drink.
The tax will raise the same amount of money for the state and hike the cost to consumers the same amount, said Anderson.
That hike in cost is likely to mean at least a 10-percent decrease in the amount of sugared drinks people will buy, government officials predict. They base that estimate on a recent study in the New England Journal of Medicine about the effects of raising the price of drinks.
“Through this approach the tax will show up on the shelf, which will hopefully deter people from buying drinks that are related to obesity,” said Anderson.
One out of every four New Yorkers is obese. The number of New Yorkers who are obese and overweight has grown from 42 percent in 1997 to 60 percent in 2008. The U.S. Surgeon General estimates about 112,000 deaths are related to obesity, according to the state 2010-2011 budget overview.
Other diseases that can result from obesity are type 2 diabetes, heart disease, high cholesterol and cancer.
But opponents object to using taxes to change people’s consumption habits. And in New York, the tax will hurt businesses that already compete with the non-taxed businesses of native American reservations.
The convenience stores have lost a lot of their cigarette business to other states and to American Indian reservations because of the cigarette tax, said Calvin of the New York Association of Convenience Stores. He anticipates seeing the same thing happen with the sugared drink tax.
“If it’s high enough to change habits, then it’s high enough to change the location they buy the drinks,” he said.
The convenience stores’ association is a member of the New Yorkers Against Unfair Taxes, a coalition made up of at least 2,500 opponents of the tax.
The coalition is also concerned the sugar-drink tax would inspire more taxes on other products, said Nelson Eusebio, the chairman for New Yorkers Against Unfair Taxes. “If they start taxing these drinks because of the sugar content then they can start taxing other things with sugar,” he said. “Where does it stop?”
(Katrina Koerting is a junior will dual majors in newspaper and political science.)
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