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Soda-tax proposal fizzes on arrival

Lawmakers slam Gov. Abercrombie's plan to levy a duty on sugary soft drinks

By Derrick DePledge

LAST UPDATED: 1:50 a.m. HST, Feb 10, 2011

Alcohol and soda, two consumer favorites, could be hit with new taxes to help with the state's budget deficit and promote healthy lifestyles.

Gov. Neil Abercrombie has proposed raising the state alcohol tax by 50 percent and establishing a tax on soda and other sugary drinks. The alcohol tax could generate $23.4 million a year, with about $5 million going to discourage alcohol abuse. The soda tax could bring in $44 million a year, with about $10 million directed to prevent obesity and diabetes.

While the Abercrombie administration says the purpose of the tax increases is to encourage people to make healthy choices, the tax hikes have also been listed by the governor as potential solutions to a projected two-year budget shortfall of $700 million.

But as with Abercrombie's call to tax pension income, alcohol and soda taxes appear deeply unpopular and a difficult sale for many state lawmakers.

"Look, the governor has the State of the State Address, but the governor, with the bully pulpit, also has the ability to address the entire state," said state Sen. Josh Green (D, Milolii-Waimea), chairman of the Senate Health Committee, which held a hearing on the alcohol and soda tax increases yesterday but put off action until Monday. "In some ways, I'd like the governor to kind of sit down with the state in public and really ask the people, 'What do they want?'"

The state now takes in about $45 million a year through the alcohol tax, which has not been increased since 1998. A 50 percent increase, according to a lobbyist for Anheuser-Busch, would make the Hawaii tax on beer the highest in the nation. The Hawaii tax on wine, according to a lobbyist for the Wine Institute, would be the third highest in the nation.

The new tax on soda would be 10 cents on beverage containers of 12 ounces or less and 25 cents on containers over 12 ounces. Sugary beverages include soda, sweetened water, sports drinks, energy drinks, sweetened coffee or tea, and fruit or vegetable drinks with less than 70 percent natural fruit and vegetable juice.

The new taxes would be applied on distributors of alcohol and soda, but industry representatives said yesterday that the increased costs would almost certainly be passed on to consumers in the form of higher prices. Tax increases on alcohol and soda are considered regressive, because they have a disproportionate impact on low- and middle-income consumers.

Representatives from industry giants such as Coca-Cola, Pepsi and Anheuser-Busch spoke out against the tax hikes yesterday before the Senate committee, but senators also heard from smaller local companies, such as Waialua Soda Works and Hawaiian Sun Products, about the potential risk to their businesses.

"A bill like this would, very much, potentially put our company out of business," said Karen Campbell, who founded Waialua Soda Works with her husband.

A mother of two, Campbell said the responsibility for controlling obesity rests with parents and individuals.

"I teach my children at home, where they should be taught, how to eat the right way," she said. "My children know the boundaries of sugar. They know the boundaries of any food. It's all in moderation. I think that the government's role is not within our lifestyle, to begin taxing on our lifestyle, or to be interpreting our lifestyle and telling us how to live."

Coca-Cola and Pepsi also warned of potential job losses if the tax increases are passed.

Economics aside, several industry representatives challenged the idea that soft drinks or any single food or drink should be blamed for obesity.

"It's not about one food and one beverage only, it's about the calorie intake and physical activity," said Dan Whitford of the Coca-Cola Bottling Co. of Hawaii. "Obesity is a complex problem. It requires a comprehensive solution. If we're serious about fighting obesity, those concerned about the issue need to get off the bandwagon of targeting one food and one beverage as ours.

"Let's face it. This bill is not about improving the health and welfare of Hawaii's citizens. It's about a discriminatory tax on our beverages just to raise money to bail the state out of the severe (fiscal) crisis that we all face. This tax comes directly out of consumers' pockets."

Lola Irvin, a tobacco settlement project manager with the state Department of Health, said adult obesity in Hawaii doubled between 1995 and 2009 and childhood obesity increased by 38 percent from 1999 and 2009. She said government does get involved in many facets of life, including health warnings about the consumption of alcohol and sugary drinks.

"Sugars are not necessary for life. They are a sometimes food. They're calories that are not necessary," she said.

Stephen Bradley, a doctor who serves on the Oahu board of the American Heart Association, said childhood obesity is a growing problem. He said he deals with patients on the Waianae Coast where one of the main issues of weight management is their sugary beverage intake, "which they are desperately trying to lower." He suggested expanding the bill to include sugary syrups.

"We feel that it's incredibly important that all the whole realm of sugar sweetened beverages and additives be brought up for this bill," he said.

Green, an emergency room doctor and a legislator, said he is mindful of the impact of sugary drinks on obesity.

"We are certainly seeing serious increases in obesity in society for many reasons," he said. "But the father in me does tend to think that we need to be more personally responsible as citizens."

Green, whose committee is the first to take up Abercrombie's proposal, said afterward that he has not decided whether to advance the bill. But he said there needs to be dialogue soon about what would replace the governor's proposals if they are rejected by lawmakers. He asked people who attended the hearing, which was dominated by opponents of alcohol and soda tax hikes, whether they would support a pension tax or cuts to state programs as alternatives. No hands went up. He asked about a general excise tax increase. Several hands went up.

"When I polled a full room about what they wanted to see -- do they want to see revenue generated from the general excise tax, from taxes on pensions, or from sin taxes? -- I mean it," Green said. "I want that dialogue right there. And I don't think it has happened yet."

Alcohol tax rate

per gallon
Under Senate Bill 1289, wine and other alcoholic beverages would be taxed at a much higher rate.
Distilled spirits $5.98 $8.97
Sparkling wine $2.12 $3.18  
Still wine $1.38 $2.07
Cooler beverages $0.85 $1.28  
Beer other than draft beer $0.93 $1.40
Draft beer $0.54 $0.81

Sugary beverages, Healthy fee

The proposed Senate bill would tax virtually all sugary beverages, from soda to juice to energy drinks.

More than 12 fluid ounces

Less or equal 12 fluid ounces

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