House Committee OKs Controversial Sugar-Sweetened Beverage Tax

The House Committee on Ways and Means gave approval Thursday to a new tax on soda and other sugary beverages. But while proponents of the measure say it’s a key step in the confronting the nation’s obesity epidemic, critics say the plan will hurt business, and target lower-income taxpayers.

No legislative chamber in the country has ever approved a tax on sugary beverages. That could change next week, when the bill approved by the committee hits the House floor for a vote on legislation that includes a half-a-cent-per-ounce tax on soda and other sugar-sweetened beverages.

“Vermont is leading the nation,” says Tina Zuk, director of government relations at the American Heart Association, which is part of a broad coalition pushing for the soda tax. “Though we aren’t where we want to be yet, we are way ahead of any other state. No state has yet passed an SSB tax.”

Zuk says the half-cent per-ounce compromise struck in Ways and Means is far less than the 2-cents per-ounce surcharge passed by the House Committee on Health Care earlier in the session. And the surcharge would now apply to diet soda as well as regular soda.

The soda tax is part of a broader health care reform bill that raises about $18 million. The bill also includes a 25-cent per-pack increase on cigarettes, an 11 percent tax increase on snuff and chewing tobacco, and would impose a 6-percent sales tax on dietary supplements.

Calais Rep. Janet Ancel, the Democratic chairwoman of the House Committee on Ways and Means, says that even at a half a cent, she says the vote signals a willingness in Montpelier to use tax policy to dissuade consumers from drinking a product that she believes is fueling the state’s obesity problem.

“I don’t think that sugary beverages are good for you. I don’t think that diet drinks are good for you. And I look at this in some ways the way we looked at tobacco … when we really started using the tax system as a way of discouraging smoking,” Ancel says.

Many in Montpelier, however, think the soda policy trailblazing is misguided. The bill passed through Ways and Means by a 6-5 margin, and Colchester Rep. Jim Condon was among the five "no" votes.

“It creates a brand new tax that I think is capricious, targets an industry that provides jobs here in the state of Vermont and won’t achieve the results that the advocates desire,” Condon says.

Since the excise tax on soda would be applied at the distributor level, critics say retailers would simply disperse the additional costs over all their products, a practice they say would negate whatever behavioral changes the higher price-point on soda was intended to bring about.

Jim Harrison, president of the Vermont Retail and Grocers Association, says the bill is more about a revenue grab than it is about sound public health policy.

“This is a very regressive tax on food products that’s going to do nothing except hurt Vermonters and their pocket books,” Harrison says.

If the bill makes it through the House, it still faces an uphill climb in the Senate. Grand Isle Sen. Dick Mazza, a strong opponent of the proposal who also owns a convenience story, says he and others will work to defeat the measure when and if it arrives there.

“I don’t think it has a good chance at passage,” Mazza says. “But I wouldn’t predict this early.”

Gov. Peter Shumlin has called for a far grander health care reform package. Shumlin proposed using a 0.7-percent payroll tax to raise $90 million annually, and then direct the money to boost Medicaid reimbursement rates, provide assistance to lower-income Vermonters now purchasing their insurance through the exchange, and a host of other health reform initiatives.

House lawmakers roundly rejected the payroll tax concept, however, and will rely on the soda tax as the primary funding source for a scaled-back version of Shumlin’s plan.

House lawmakers have yet to decide exactly how they’ll spend the money raised by the tax bill.