New drink tax widely opposed

Wednesday, June 3, 2009

WASHINGTON -- A push for new taxes on soda, beer and wine to help pay for Americans' health care is stirring up more than just the beverage industry.

Advertisers, corn refiners -- even addiction treatment centers -- have mobilized their lobbyists, reflecting how a tax increase for a handful of popular products can reverberate broadly across Washington's interest groups.

The Senate Finance Committee is considering raising taxes on alcohol and imposing a new levy on soda and other naturally sweetened drinks to help pay for overhauling health care. The committee calls them "lifestyle tax proposals," saying the levies would slow sales of unhealthy products that contribute to rising medical costs.

Soft drink and alcohol lobbyists have snapped into action, though so far their campaigns have been quiet compared to the blaring, multimillion-dollar battles that typify major showdowns.

Their low-key approach is due partly to committee leaders' warnings to refrain from public attacks or be accused of sabotaging health care overhaul. They've also held back because they have faced only modest lobbying from tax proponents, and because they think the proposal may prove so unpopular that it ultimately won't threaten their businesses.

"They don't want to call attention to a quietly smoldering fire," said Rogan Kersh, an associate dean at the Wagner School of Public Service at New York University.

Besides alcohol, drinks with sugar, high fructose corn syrup and similar sweeteners would be targeted, though diet drinks with artificial sweeteners would not. Other industries also are on alert, worried that the idea of "lifestyle taxes" could spread to other products deemed unhealthy.

"Are they going to hit couch manufacturers? School districts that have canceled physical education?" joked Neil Trautwein, health care lobbyist for the National Retail Federation, which opposes the plan and whose members include fast-food restaurants.

Sugar producers and manufacturers of sweetened foods are opposed, as are dairy farmers and milk processors, since chocolate milk would be hit. Alcohol retailers want to go the opposite way, pushing for a cut in the existing tax on their products. That tax ranges from 21 cents per bottle of wine to 33 cents per six-pack of beer to $2.14 per fifth of hard liquor.

Even local governments are following developments closely.

Pennsylvania, one of several states that profit from alcohol because it runs the stores where it is sold, is watching to see how the proposal might affect it.

The American Beverage Association, representing makers of sodas, sports drinks and similar products, has been among the most active foes. It enlisted seven groups to join in a letter to senators opposing the tax, including the American Advertising Federation, whose members include Coca-Cola and Pepsi-Cola, and the Corn Refiners Association, whose companies make sweet syrups that would be taxed. Also signing were associations for grocers, food marketers and food vending machine operators.

"Dangerous Tax Threat Looms on Capitol Hill," the beverage association's Web site warns, urging the industry's 220,000 employees to e-mail Congress. Its recent ad in Capitol Hill newspapers highlights the industry's agreement to gradually lower calories in beverages sold in schools; it doesn't mention the tax proposal.

"We do want lawmakers to know, regardless of what legislation they may be considering, that this industry is out there doing its part," said Kevin Keane, a beverage association spokesman.

Many alcohol industry trade groups declined to discuss the Finance committee proposal. The Wine Institute, representing California vintners, provided one paragraph saying the tax would cost jobs, raise prices and single out a drink that is "part of a healthy diet and lifestyle for millions of Americans."

The Distilled Spirits Council of the United States has a Web site called "Stop Hospitality Taxes." It lets viewers automatically send e-mail opposing the tax to members of Congress, and provides paragraphs senders can insert into their messages with one click.

The Center for Science in the Public Interest, a consumer advocacy group, has been a leading proponent of the taxes. Executive Director Michael Jacobson wrote an op-ed column supporting the levies in the Montana Standard newspaper, in the home state of the panel's chairman, Democratic Sen. Max Baucus.

"Who wants to talk about raising taxes, especially for a product people enjoy?" Jacobson said in an interview, explaining the low-key support for the levies. "These aren't smokestacks."

Even addiction treatment providers are watching.

Ron Hunsicker, who heads a trade group for such centers, said he supports the alcohol tax if "those dollars will come back and beef up" federal spending on treatment programs.

Waiting in the wings are hospitals, doctors, insurers and drug makers who could bear the brunt of the $1.5 trillion that Congress' reshaping of health care could cost over the next decade.

Though those health care providers have larger concerns than beverage taxes, they know each dollar collected from the levies could be one less dollar from their own pockets. The American Hospital Association has voiced support for "tax incentives on lifestyle-related choices," while the American Medical Association backs raising alcohol levies but has been silent on taxing sweetened drinks.

Recent history shows the challenge. Maine voters rejected a soft drink tax last November and New York Gov. David Paterson dropped a proposed tax on sodas earlier this year. Several senators on the Finance committee, including top Republican Charles Grassley of Iowa, have said they oppose the proposal.

"Before you tax Joe Six-Pack on his beer and Joe Junior on his soda pop at the Little League game, people are going to say, 'Can't you go out and find some savings from'" the health care system, said one committee member, Sen. Ron Wyden, D-Ore.

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AP reporter Mary Clare Jalonick contributed to this report.

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