$1 Billion 'Obesity' Tax on Beverages: Harmful if Swallowed

Calling it critical to addressing obesity, Governor Paterson has proposed a broad, costly, intrusive tax on sugar-sweetened beverages beginning next school year.

It would apply not just to non-diet soda, but any non-alcoholic beverage, carbonated or non-carbonated, containing more than 10 calories per 8 ounces. That captures soda, water, sports drinks, energy drinks, fruit and vegetable drinks containing less than 70% natural juice, bottled coffee and tea, and powdered and frozen concentrates. Exempt would be dietary aides, infant formula, milk and milk products and exports.

The “penny per ounce” excise tax would add at least $1.50 to the price of a typical 12-pack of non-diet Coke or Pepsi cans (nearly 10 times the state excise tax of about 16 cents on a 12-pack of beer). This price differential is more than sufficient to chase customers away from New York convenience stores to nearby Native American stores to buy “tax free” soda and border states that charge no such tax, replicating the cigarette tax epidemic that has crippled our industry.

According to Governor Paterson’s budget proposal, “on average, this tax will increase the price of sugar-sweetened beverages by 17 percent, which will reduce consumption by approximately 15 percent, improve nutrition, raise revenue for health programs and recover some of the health costs caused by consumption of high calorie, nutrient poor foods and beverages.”

The excise tax would be imposed at a rate of $7.68 per gallon of syrup and $1.28 per gallon of bottled soft drinks (one cent per fluid ounce). It would be collected at the “distributor” level, defined as an importer, bottler or manufacturer. Distributors may have to register with the Tax Department and even post a bond. Distributors and retailers would have to keep on file invoices or delivery tickets identifying the purchaser and the payer of the tax.

The new tax would take effect September 1, 2010, and would be designed to increase revenues by $1 billion a year on an annualized basis. In other words, the solution to obesity is for cash-strapped, thirsty New Yorkers to pay $1 billion more to their bloated state government. It would take 1.4 billion six-packs to generate that amount of revenue.

NYACS strongly opposes this tax on its own and as a member of a coalition called New Yorkers Against Unfair Taxes, which is leading the fight against new taxes of foods and beverages.

NYACS Press Release on Beverage Tax

NYACS Testimony Opposing Beverage Tax: NYS Legislative Budget Hearing 2/1/10

New Yorkers Against Unfair Taxes Press Release 1/20/10

Syracuse Anti-Beverage Tax Rally Press Release 2/5/10

American Beverage Association Analysis - Summary

American Beverage Association Analysis - Price Impact