Friday, March 6, 2015

Soft drink lobby pressing hard for repeal of tax

Posted By on Fri, Mar 6, 2015 at 10:56 AM

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Bear with me. I'll be getting to the one item on the free swill calendar today.

Little has been said publicly but lots privately by the soft drink lobby about a bill sponsored by dozens of ultra-conservative Republicans to dramatically reduce the soft drink tax that is a monument of Gov. Jim Guy Tucker's brief tenure.

The tax was passed in 1993 over massive opposition from the drinks lobby to support Medicaid. It produces about $44 million a year for the state and is then matched about 2.5-1 by federal dollars. Voters upheld the law in a 1994 referendum.

As written, the tax is $2 per gallon of of syrup used to mix with water or carbonated water to produce drinks; 21 cents per gallon of bottled or canned soft drinks, and 21 cents for each gallon produced by powders or base products.

The proposed bill, avidly sought by restaurants such as McDonald's that use syrup to mix fountain drinks, would lower the tax on syrup from $2 per gallon to 21 cents for each gallon of drink produced. A gallon of syrup produces about six gallons of beverage. So this bill, as written, would produce about $1.26 in tax revenue, a reduction of 74 cents per gallon, or a 37 percent tax cut.

It's not clear how much of the gross soft drink revenue is tied to syrup. It also isn't clear whether the soft drink lobby has designs beyond the current form of the bill on other reductions. by some accounts, the lobby hopes for an eventual phaseout.

UPDATE: The revenue impact was filed Tuesday. It shows, when fully implemented, a loss of $5.2 million to the Medicaid trust fund ($3.9 million for the remainder of this fiscal year). But multiply that amount by 2.5 and add it for true impact. Or else just consider that $5.2 million will have to come out of the hide of another government program to give the sugar drink sellers a tax break.

Thirty-nine states tax soft drinks in some fashion, such as retail sales taxes, but Arkansas is among a small handful of states that impose a tax at the distributor and wholesale level.

A major tax cut would be another run on Gov. Asa Hutchinson's tight budget and would be an ongoing loss, not a one-time reduction.

So the rest of the story is whether the soft drink lobby has a proposal it can pass to raise another tax to offset the loss of soft drink tax. One rumor circulating is putting a tax on low-cost phones with refillable minutes, as opposed to phones that operate on a contract with a telcom company.

Note that ARBEV, the soft drink lobby, is one of the hosts of the weekly backroom lunch at Doe's

It will be held today after the House adjourns. Public is welcome. Drop on by. It's a scheduled activity of the House and thus open under the Arkansas Constitution. Have a cheeseburger. And a Coke. No Pepsi.

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