Desperate Measures

Financially Strapped Governments Tax Junk Food ... What's Next?

Awash in debt, legislators are on the prowl for easy targets that they can tax to bail themselves out of the financial hole that they created. Candy and soft drinks are just the latest targets. The only limit to their grab could be in the hands of consumers, who can vote out of office those who would indiscriminately tax our purchases.

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Chocolate bars, gumdrops, licorice, potato chips, soft drinks. Who doesn’t indulge once in a while? Now here’s a pop quiz: How much tax do you pay on each of these items? You don’t know? Join the club.

Thirty-three states plus the District of Columbia tax candy and soft drinks at a higher rate (5.2 percent on average) than they do essential groceries, such as cheese, fruit, meat and vegetables. (Colorado, Illinois, Washington and Wisconsin joined the group in the past year.) Unfortunately, the taxes are based on confusing definitions that even retailers have trouble understanding, so it’s often difficult to know what’s taxed at a higher rate than normal when you reach for it on a store shelf.

Conservatives and libertarians deride the new taxes as punishment for anyone who dares to pamper his/her palate. Shrill far-righters go so far as to say the government wants to take away your freedom to enjoy a Coke and a smile.

Public-health gurus advocate extra taxes on soft drinks as a step toward recouping the huge health costs that are associated with obesity. These advocates also hope that a tax on sugary beverages will shrink the average American’s larger-than-average girth.

In reality, analysts tell us, the flurry of candy and soft-drink taxes that states are newly imposing are neither a sneak attack on your liberty nor a push for a slimmer you. By far the biggest thing that these taxes do is transfer dollars from your wallet to governments that are trying to end budget deficits in these economic tough times.

“It’s a revenue grab, plain and simple,” says Justin Higginbottom, who analyzes state taxes for Tax Foundation, which is a nonpartisan group that advocates lower taxes.

And hold on to your wallets, because we expect governments to get even more grabby in the days ahead. If some state legislators have their way, you soon will pay an extra “sin tax” for non-essential items, such as beverages, chips, fast food and even pizza. Even the feds are joining the food fight: A national penny-per-ounce tax on soft drinks has been on Congress’ radar for the past 2 years.

The push for more taxes goes beyond consumables. The federal government added a 10 percent tax, which took effect in July, to indoor tanning. And Congress is considering a tax on online purchases. As with junk food, these taxes are based on confusing definitions, so it’s easy to see why some consider this to be nothing more than a shakedown.

CANDY CONFUSION. Illinois hopes to raise about $100 million a year from its new candy tax; Washington anticipates $30 million annually from its candy and gum tax. Experts with whom we spoke say it’s difficult to know whether these estimates are realistic, because states have been hesitant to release their tax-revenue figures.

What is clear is that the definition of “candy” and “soft drinks” that was adopted by 33 high-tax states is confusing retailers and consumers. When Washington’s state tax took effect this year, its tax department published a list of 12,000 products that it categorized as taxable or nontaxable. It is the only state that does that. In the other 32 states, retailers have to read each package and program their computer systems or databases accordingly.

A blanket tax would be easier to understand than would a piecemeal tax on vaguely defined products, says David Vite, who is president of Illinois Retail Merchants Association.

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