Vermont debates tax on sugary drinks

MONTPELIER – Vermonters are speaking out about whether a sugar-sweetened-beverage tax would reduce consumption or merely drive sweet-toothed residents across state lines.

Members of the Vermont House Ways and Means Committee heard both viewpoints Wednesday about a controversial bill to levy an excise tax of 2 cents on every ounce of sugary beverage distributed in the state.

The excise tax — spelled out in H.B. 235 — would be applied to sugary beverages at the time of distribution to stores. The tax would generate about $30 million in revenue per year for Vermont, according to Tom Kavet, the Legislature's economic consultant. The revenue could go toward health care subsidies under a bill the House Health Care Committee is scheduled to vote on Thursday.

The tax would be the first of its kind enacted by a state legislature, said Anthony Iarrapino, campaign director for Alliance for Healthier Vermont, which is advocating for the tax. The only similar measure in the country was passed in a referendum in November in Berkeley, California, Iarrapino said.

Several other states have sales taxes on sugary beverages, said Frank Chaloupka, economics professor at the University of Illinois at Chicago.

Pediatrician Barbara Frankowski of the University of Vermont testified that obesity in the state has climbed from 11 percent to 25 percent since 1990.

Nationwide, the consumption of sugary beverages has increased by 500 percent in the past 50 years, she said. Sugary beverages are responsible for about one-fifth of weight gain in the U.S. population from 1977 to 2007, she said.

Why should the state Legislature care about that weight gain?

There are significant costs associated with obesity, Chaloupka said. Health conditions caused by obesity cost the nation about $200 billion per year, he said.

Research indicates a sugary beverage tax would curtail the consumption of such drinks, as has been the case with tobacco taxes, he said.

"As prices for healthy foods go up, we have seen obesity rates going up," Chaloupka said. "As we have seen prices for unhealthy foods going down, we have seen obesity rates going up."

Initial results from a sugary beverage tax in Mexico show that the consumption of sugary beverages declined by about 10 percent after the tax was levied in 2014, Frankowski said.

Some distributors and store owners said the tax would hurt small businesses.

"All this tax is going to do is drive sales elsewhere, and we can't afford that," said Pam Trag, owner of Quality Market in Barre.

Jim Harrison, president Vermont Retail and Grocers Association, said he thinks the tax would result in the closure of some stores along the state's borders, where consumers can drive to New Hampshire or Canada to avoid the tax.

He said a bottle of fruit juice with some added sugar that costs 66 cents would rise to about 86 cents with the tax. In some cases, he added, the cost of a beverage would nearly double.

"There are going to be job losses, because this is going to shift around a lot of the cost structure," said Kevin Dietly, a beverage industry consultant with Northbridge Environmental Management Consultants, a firm with offices in suburban Boston and Washington, D.C.

He estimated that 860 out of the 3,000 jobs in the state's beverage industry would be lost.

Some witnesses also questioned whether the tax would accomplish its goal of helping to reduce obesity. Some witnesses said distributors and retailers could choose to spread out the cost of the tax to all products on store shelves rather than targeting sugar-sweetened beverages, as the bill intends.

"This is a similar argument we heard with the tobacco tax," Iarrapino said. "In state law, there is a provision that you must pass the tax on down the supply chain. You have to include it on the good on which the tax was levied rather than spreading it."

Iarrapino said the sugary beverage tax is the best means for addressing the obesity crisis.

"This is not about punishing individuals for selling a lawful product," Iarrapino said. "It's more about encouraging people to make healthier choices."

Harrison said that isn't government's role.

"You can't tax people into eating Brussels Sprouts," he said.

Contact Paris Achen at pachen@freepressmedia.com. Follow her on Twitter at www.twitter.com/parisachen.