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Industry Rallies Against NY Governor's Sugary Drink Surcharge, Bottle Bill Expansion

Posted On: 12/22/2008

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ALBANY, NY -- The National Automatic Merchandising Association and the American Beverage Association have pledged to lobby against New York Gov. David Paterson's proposed "obesity tax" on sugary drinks and extension of the state's 5¢-per-container bottle bill tax to include noncarbonated beverages.

Unveiled last week, Paterson's budget proposal aims to close a $12.5 billion deficit for next year and is supported by New York City Health Commissioner Thomas Frieden. It imposes an additional 18% "obesity" tax on nondiet sodas and fruit drinks containing less than 70% natural fruit juice. Projected to raise an estimated $404 million, revenues from the new tax would be directed to fund public health programs, including obesity prevention programs, across New York State.

"What smoking was to my parents' generation, obesity is to my children's generation," Paterson remarked. "Nearly one out of every four New Yorkers under the age of 18 is obese. That is why in the state budget I proposed a tax on sugared beverages like soda...

"In recent decades," he continued, "antismoking campaigns have raised awareness. Smoking bans have been enacted and enforced. And, perhaps most importantly, we have raised the price of cigarettes. Just as the cigarette tax has helped reduce the number of smokers and smoking-related deaths, a tax on highly caloric, non-nutritional beverages can help reduce the prevalence of obesity."


PHOTO: NY Gov. David Paterson delivers a balanced Executive Budget on Dec. 16, more than one month prior to the state constitutional deadline, which would eliminate the largest budget deficit in the state's history. His proposal includes a series of difficult decisions across every area of state spending, as well as targeted increases in revenue, to address an unprecedented fiscal and economic crisis.

The governor acknowledged that additional measures are necessary to effectively address the obesity crisis, including encouraging children to exercise more, increasing the availability of healthy food in underserved communities and removing "junk" food from schools.

"We in the vending industry are just as concerned as everyone else about rising obesity rates and ensuring that people live healthy lives, which is why in 2005 we launched our national health and wellness initiative Balanced for Life," NAMA said in a prepared statement. "We believe, however, that a better approach would be educating consumers about the elements of a balanced diet and the importance of physical activity. Our members should know that we will work with other interested organizations to make sure our industry's voice is heard."

There is little precedent for Gov. Paterson's tax proposal. In Maine, the state legislature approved new wholesale taxes on sodas and the syrup used to make them as part of a measure to raise money for the state health program. Gov. John E. Baldacci signed the measure into law in April, but last month overturned the tax through a legislative appeal process, The New York Times reported. San Francisco mayor Gavin Newsom has also proposed charging an additional tax to big retailers that sell sugary drinks.

NAMA senior vice-president and chief counsel Tom McMahon said, "With a sales tax on drinks of 8%, tacking on another 18% is a very substantial proposal. I've never heard of anything even close." He expects NAMA's New York state vending council and lobbyist to oppose the proposed tax changes at every opportunity.

The American Beverage Association charged that the proposed sales tax on regular soft drinks is simply a façade for raising taxes. "Singling out one particular product for taxation won't even make a dent in a problem as complex as obesity," ABA said. "This point is supported by science as well as common sense.

"If we want to be serious about battling obesity, we need to comprehensively address the consumption of all foods and beverages in moderation and get more active as a society," said an ABA official. "It's discouraging that some are perpetuating the myth that taxing one product will make a difference in obesity, or even contribute to fighting the problem. It won't."

Paterson's proposed expansion of the bottle bill extends the 5¢-per-bottle tax on carbonated beverages to include all beverages -- except for milk and a few other exceptions -- in containers less than one gallon in size

Peter O'Connell, legislative counsel for The New York State Automatic Vending Association has been lobbying against the tax, which is back on the table after being introduced in prior legislative sessions.

"Reclaiming empties presents unique problems to the vending industry," O'Connell told VT. "In many instances, vending company route salesmen collect empties when they service vending machines. This process invites serious health concerns because these unsanitary empties are transported in vehicles that often carry perishable foods. In other instances, vending companies contract with third parties that are in the business of collecting returnable beverage containers. In both situations, the process is time consuming, cumbersome and costly to a degree that redemption fees provide little or no relief. Expansion of the law to noncarbonated beverages will only exacerbate this situation."

The major objection that the vending industry has with the "bottle bill," O'Connell emphasized, is that it is difficult to pass the cost of the deposit along to consumers. Unlike a supermarket or a convenience store, where sales taxes and deposits are added on at the time of purchase, vending machine operators are forced to include these expenses in the purchase price.

"A bottle of water sitting next to a bottle of soda in a vending machine is worth another nickel to a vending machine operator because there is no deposit built into the vend price," he explained. "The loss of this nickel will cost most vending machine operators tens of thousands of dollars in bottom-line revenues. The loss of this nickel will render many accounts unprofitable, because prices are often negotiated in advance under long-term contracts to provide vending services to large companies, hospitals, educational institutions and governmental agencies."