» Taxes & Soft Drinks

Taxing Beverages

Some states and communities have implemented taxes on nonalcoholic beverages as a way to raise government revenue and fund various programs. But taxing beverages, or any food item, is a poor way for governments to increase revenue, especially in tough economic times.

Voters in Maine soundly rejected a recent attempt to tax beverages to fund state programs.  By a 64 to 36 margin in the November 2008 election, Mainers declared that they were “fed up with taxes” and rolled back a tax enacted by the Legislature months earlier.  Maine residents understood that beverage taxes are:

• Unpopular – The public views beverage taxes as a tax on food. Even if the taxes are imposed directly on businesses, surveys show that 95 percent of consumers believe they will ultimately bear the burden of beverage taxes, passed on to them by producers and retailers.
• Regressive – Beverage taxes hurt low-income consumers significantly more than others because it raises the price of groceries, which is most harmful to those on fixed incomes. As a result, those least able to afford beverage taxes bear the greatest burden.
• Unfair – Beverage manufacturers and bottlers already pay their fair share of business and other taxes, generating more than $55 billion in revenue annually for federal, state and local governments.
• Anti-business – Beverage taxes raise the cost of doing business, not just for beverage companies, but for their suppliers and retail customers as well. Higher costs reduce reinvestment and job growth – a critical consideration given that the beverage industry directly or indirectly supports nearly 3 million American jobs and $112 billion in wages and salaries.

Today only Arkansas, Washington, West Virginia and the city of Chicago retain discriminatory taxes against beverages. In recent years, the trend has been to repeal or reduce these taxes. In fact, since 1990, 10 states and communities have repealed discriminatory taxes on soft drinks.