Hysterical tax opponents are lying to you -- part 2: "junk food" tax

Since Governor Patrick proposed giving cities and towns the option to raise meals and hotel taxes as well as tax increases on the sale of “junk food” and alcohol, you can hardly pick up a newspaper or turn on the TV news without coming across some hysterical legislator, business owner, or consumer crying that the increases will force people to go to another town or state to do their business.

Do not listen to them. With almost no exception they are either monumentally stupid or lying to you.

Last week, I looked at the crazy argument that someone might run for the town or state border if a local-option meals tax were allowed. In this installment, I will discuss opposition to the governor's proposal to extend the 5% sales tax to soda, candy and other "junk" foods, and what I consider a better model for the governor's proposal.

As with any proposal to raise revenues, every conservative and commercial special interest from Great Barrington to Newburyport howled about the draconian impact that adding four cents to the price of a candy bar and seven cents to a bottle of Pepsi would have on consumers and businesses. To hear them discuss the proposal, the difference between the ability of ordinary joes to pay their bills and a life of despair and destitution is found in those 11 cents. From the Sentinel and Enterprise:

State Sen. Steven Panagiotakos, chairman of Senate Ways and Means, said he had some concerns that the new taxes would drive consumers over the border to New Hampshire. He also said he expected to see more cuts and less reserve money used....

Republicans blasted the tax proposals as a "nickel and dime" approach to balancing the budget when there are others areas that could be cut.

Rep. Robert Hargraves, [R]-Groton, said the candy, soda-and-alcohol tax will drive people over the border to shop.

"My mom-and-pop stores have one foot on a banana peel and another in the bath tub. That's a precarious situation to be in," Hargraves said.

For once, can we just have a sensible discussion. Nobody, nobody, NOBODY, is going to cross the border for a Snickers and a Coke. It is not going to happen. And if it does happen, that says more for the sorry state of education in whatever border town a moron who would drive to New Hampshire to save 11 cents comes from than it does about this tax policy.

(And can we please just forget about New Hampshire for a minute? I don't give a damn what New Hampshire does, we need to do what is best for Massachusetts. I get tired of the couple hundred thousand people (if that) who live in New Hampshire border towns driving the discussion for the rest of us. I get it. New Hampshire has no sales tax. There is a hell of a lot more that New Hampshire doesn't have. You don't hear the same discussions about Connecticut or New York or Rhode Island because they are all more expensive than Massachusetts when it comes to sales taxes, meals taxes, and yes, junk food taxes.)

The Boston Herald was characteristically thoughtful in their coverage:

The governor, who wants to see the measure go into effect by April 1, rebuffed suggestions that the tax intruded on personal choice.

“I think dedicating those funds to nutrition and wellness services is a wise decision,” Patrick said, adding other states have passed the tax. Both New Jersey and New York have a 6 to 7.5 percent sales tax on candy and soda....

Business groups say the tax will hurt the Bay State economy.

“We think it’s a totally unfair thing to do and it hurts companies like NECCO,” said Larry Graham, president of the National Confectioners Association.

The famous NECCO wafers and Sky Bars are made in Cambridge.

Taxes are like, "totally unfair!" Your sleeve of NECCO wafers will now cost you 93 cents instead of 89 cents! Don't let the man "intrude on your personal choice!" Power to the people!

The Globe had an unintentionally (I think) hilarious take on reaction to the proposal:

Governor Deval Patrick's plan to tax candy and sodas is worrying store operators, who say it will further reduce sales at a time of economic decline, when even children have become price-sensitive and are cutting back.

"Kids are going to stop drinking sodas," said Pinto Patel, a clerk at the Brighton convenience store Palace Spa. "Their parents don't give them a lot of money."

Because of a recent increase in candy prices, he said, children are already "looking for the cheap stuff."

I wonder if Mr. Patel realizes that he is making the governor's point. As the Globe story points out, the Patrick administration is looking at lower usage of soda, candy, etc. as a byproduct of the proposal. If kids actually stop drinking soda, he would consider it a big victory:

"Evidence-supported data has shown that each of these products serve more as a detriment than a benefit on the health and well-being of an individual," the Patrick administration wrote in support of the budget proposal. "Removing the tax exemption for the purchase of sweetened soda and candy is a critical first step in discouraging the consumption of these empty calories."

I think the governor is hoping for a result that he's not going to get. Removing the sales tax exemption on these items will not have any effect on consumption, just like it will not drive people over the border. In any event, the grocery lobby wants you to know that it is on the side of consumers like you and me:

"This is not the economy to be raising taxes on consumers," said Chris Flynn, president of the Massachusetts Food Association, which represents grocery store operators. "People's budgets are stretched to the maximum right now. They're buying down and only buying strict essentials. The last thing they need is another hit on them."

Does this Mr. Flynn--or for that matter a spokesman for any trade organization--actually pay any attention to what he is saying? If people are only buying strict essentials then they have already cut soda and candy out of their budgets, so they are not going to be taking another hit.

(As another aside, can someone tell me why we become so outraged over the idea that the 20 oz. bottle of Sprite you get at Cumberland Farms will cost you $1.56 instead of $1.49, but we express no outrage that the soda companies are charging you something in the neighborhood of five times the price of gas for what essentially is sugar water? Come on, people! If there is one ripoff in America that is it. And I say that as someone who gets ripped off buying Diet Coke at least as much as anyone else.)

But as is the governor's wont, his proposal is too clever and too nuanced and too targeted. For instance, candy is taxed, but cookies, donuts, and other pastries are not. Lemonade would be taxed, but orange juice would not. A bottle of diet soda with no calories or fat would be taxed, but a tub of ice cream or a bag of Doritos would not. A far more sensible idea would be to model the proposal after Rhode Island's tax structure:

Individual prepackaged or factory-sealed bags or packages of chips, popcorn, nuts, trail mix, crackers, cookies, snack cakes, or other snack foods sold by food or convenience stores are not considered prepared foods and are not subject to the 1% local tax. However, packages of these items of five (5) ounces or less continue to be subject to the 7% state sales taxes as food for immediate consumption.

Chilled bottles or containers of fruit juices/drinks, milk, soda, water, iced coffee/tea, etc. are subject to the local as well as the 7% state sales tax when sold in containers or bottles of 24 ounces or less.

In Rhode Island, the sales tax on food roughly mirrors the meals tax in the sense "food for immediate consumption" is taxed the same way by the state whether it is purchased in a restaurant or in a convenience store. It doesn't matter what type of food it is, it matters whether or not the food is generally meant to be eaten right away or in an individual size. That makes altogether more sense to me than it does to single out certain types of food based on how healthy or not they are. The governor should replace his current proposal with one that makes more sense.

And the hysterical tax opponents should trade in their sugary caffeinated soda for some tax-free warm milk and relax.

Tags: Massachusetts Deval Patrick Sales Tax Meal Tax