Business owners aren't too sweet on proposed tax on sugary drinks
Dozens of people attended a House Ways and Means Committee hearing on a bill that would impose a tax on sugary drinks. (Photo by William J. Ford/Maryland Matters)
Supporters of a bill to tax sugary drinks told a House committee Thursday that the bill would raise $500 million a year for healthy school lunches, child care scholarships and to bring down a looming state budget deficit.
And it would make us healthier in the process, they said.
To make that last point, Del. Emily Shetty (D-Montgomery) brought a 30-ounce soft drink, a bag of sugar cookies and a two-layer devil's food chocolate cake for her testimony to the House Ways and Means Committee. She counted out 11 cookies and cut a slice off the cake, and said the cookies and the rest of the cake had the same 110 grams of sugar as the Pepsi inside the Big Gulp.
'That's what we're talking about when we're thinking about the equivalent amount of sugar in this amount of soda,' Shetty testified. 'These beverages actually offer no health benefit. It's really easy to consume this quantity of sugar without actually feeling satiated.'
Opponents agreed with the need to provide healthy options for people, but said Shetty's proposed 2-cents-per-ounce tax on sugary drinks, syrups and powders is not the way to do it.
Besides increasing prices for consumers, they said, the tax could cost people their jobs in the beverage industry.
'This bill will take $500 million out of the grocery budgets of Marylanders,' said Marshall Klein, president of Klein's ShopRite with nine grocery stores in Baltimore and Harford counties and Baltimore City.
'It will make it harder for grocery stores operate. It will significantly impact the ability to address food desert issues,' Klein said to applause from the packed hearing room.
The testimony came during more than two hours of debate on House Bill 1469, also called the 'For Our Kids Act.' The bill has also been assigned to the House Economic Matters Committee, some members of which attended Thursday's hearing.
The bill proposes a tax on distributors of sweetened drinks including those with artificial sugar substitutes. Powders and syrups would also be taxed based on the total ounces of drink that each container could make.
According to the bill's fiscal note, the tax would increase annually tied to inflation starting July 1, 2027. In years when the cost of living is flat or declines, the tax rate would not decrease but would remain the same. The proposal is similar to how the state calculates gas tax rates each year.
The tax is based on a drink's volume rather than its sugar content.
Of the revenue raised, about $189 million would fund free breakfast and lunch programs in the state Department of Education. Another $50 million would go to the department's child care scholarship program, which pays child care for working parents in some situations. State Superintendent Carey Wright said in December that the child care program costs could exceed $700 million a year on its current trajectory.
The balance of money raised by the tax would go to the state's general fund.
During the hearing, House Minority Leader Jason Buckel (R-Allegany) asked Shetty, with a can of Sprite in front of him, what other drinks the tax might apply to, pointing to protein drinks and artificial sweeteners.
'Artificial sweeteners are not actually healthier, right? That was the big reason for why we included them as part of this bill,' Shetty said.
Del. Steven Arentz (R-Upper Shore), a member of the Economic Matters Committee, asked if everyone would be taxed.
'No, it's not tax increase on everyone sir,' Shetty said. 'It's a tax increase on those who choose to buy the beverages.'
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If approved, Shetty said Maryland would be the first state to impose such a tax.
Several cities approved a beverage tax, including Philadelphia, which the Maryland bill is modeled after. But business owners and beverage industry representatives testified that the Philadelphia tax, implemented in 2017, led to job losses, reduced work hours for employees and forced some customers to shop outside the city.
Jim Pica, an attorney representing Royal Farms, said Cook County, Illinois, implemented a 1-cent-per-ounce tax in August 2017. Three months later, the county repealed it.
But supporters such as Riccara Jones, political action chair for the Maryland State Conference of the NAACP, said the tax would ensure underserved communities receive healthier food options.
'For too long, sugary drink companies have targeted Black and brown communities with ads and promotions for soda, fruit drinks and sweet tea products that have proven to lead to serious health problems,' Jones said in virtual testimony. 'Outside of the positive impact that this would have on communities of color, it comes in a time when the state really needs the funding to cover programs that support working families like early childhood education, like child care and healthy school meals.'
Del. Jheanelle Wilkins (D-Montgomery), who serves as vice chair of the Ways and Means Committee, said a Coca-Cola bottling facility is in her district. She complimented the business and the diversity of the workforce.
'Part of my concern…about this bill is the impact on the workers there. A lot of them have been there for at least 15 years,' said Wilkins, chair of the Legislative Black Caucus of Maryland. 'I'm going to unpack further the impact when it comes to workers, if this bill were to be implemented.'
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