As our new president settles into the White House, his first 100 days will be dominated by hefty campaign promises and even heftier budget crises. Barack Obama has asked the country to “be realistic” about what to expect during the recession. But chances are slim that Americans waiting to see the expansion of child health care and other fall campaign pledges will remain patient for long. Like states and municipalities across the country, the new administration is in desperate need of more revenue to fund these promises, and it is poised to deal with that budgetary headache by passing it on—to you.
The “luxury” beverage tax quickly is shaping up to be the go-to money tree for cash-strapped politicians and bureaucrats this year. An estimated $4.5 billion-a-year federal excise tax may be the president’s ticket to addressing some of America’s high expectations.
As I write this, California Gov. Arnold Schwarzenegger still is pushing a nickel-a-drink excise tax on adult beverages—small change compared to the rumored dime-a-drink proposal now circulating in Maryland. Even New York Gov. David Paterson’s idea to hit nondiet soda and some fruit drinks with an 18-percent tax has been drawing praise from activist groups and newspaper editorial boards.
Clearly, the proponents of these drink taxes don’t mind kicking the food and beverage industries, or their customers, while they’re down. The hospitality industry, its suppliers and its advocates must work overtime to stop this trend. In addition to having our lobbying guns blazing in Washington, we must unite to push back against every single local tax proposal—from New York and California to the county level. An aggressive, far-reaching public-education campaign is the first step.
Listening to beverage tax proponents, you get the impression that new taxes are going to work all sorts of budgetary and public-health miracles. Of course, experience and common sense tell you it’s not so. But soaring deficits already have given activist groups like the Center for Science in the Public Interest a new talking point on why elected officials should raise the price of beverages they wish we wouldn’t drink.
When Gov. Paterson announced his soda tax, for example, CSPI’s Margo Wootan told The Financial Times that the tax is “a reasonable way to raise money.”
“It is totally a luxury item,” she said, “an extra that people do not need to have in their diet.”
The idea of activists and government teaming up to decide what Americans don’t “need” to consume should be frightening.
Restaurants must get the message out that raising alcohol or soda prices won’t address any of the health and safety issues that activists love to associate with these beverages. Prohibition didn’t alleviate chronic alcohol abuse; banning soft drinks won’t affect obesity levels, either.
A recent University of Maine study on soda bans in schools found that making soft drinks less available had no impact whatsoever on what students chose to drink. Taxing beverages may be convenient for health activists, but the best ways to address obesity—exercise and moderation—are never going to be the easiest ones.
Last year hospitality businesses successfully defeated 27 out of 27 drink tax proposals, and there’s no reason we can’t do the same thing this year.
Raising taxes on an industry that is already under severe economic strain will hit small businesses and entry-level workers the hardest—low- and middle-income Americans who also would bear most of the burden of highly regressive drink taxes. At a time when U.S. unemployment is at a 16-year high, consumers should be hearing that message loud and clear.
If governments are so determined to shrink deficits this year, they should start getting as creative about saving as they have with spending. With tax dollars going toward Alaskan ice worm research in New Jersey, $326,000; giant inflatable alligator waterslides in Texas, $367,000; and remounting the “the world’s largest mounted fish” in New York, $135,000, there’s plenty of room for discretion.
Our industry has its own revenue issues without being burdened with those created by thriftless government spending. Your business shouldn’t be held responsible for trillion-dollar deficits—and neither should your customers.
Richard Berman is president of Berman & Co., a Washington, D.C.-based lobbying firm.
