Lawmakers bring beverage fee proposal to the party, businesses feel buzzkill

HONOLULU—In his State of the State address, Governor Neil Abercrombie proposed an increase in the alcohol tax and a fee on soda and other “similar drinks.” A fee on our softdrinks is part of a plan to generate new sources of income in Hawaii to help pay for spending in areas deemed more essential.

On Monday, lawmakers moved forward a measure, Senate Bill 1289, that includes raising the liquor tax by 50 percent and instituting a new sugary beverage fee. Lone Republican Sen. Sam Slom was the only “no vote” coming from the Senate Committee on Health. The proposed fee would be on individual beverages manufactured in or imported into Hawaii, excluding beverages exported for sale outside the State. The fee would be 10 cents on containers of 12 fluid ounces or less and 25 cents on anything larger.

Under the bill, a “sugary beverage” is defined as any soda, juice, or other non-alcoholic beverage that is sold in separate deposit beverage containers with a to-be-determined amount of sugar. The bill targets sweetened water, soda, sports drinks, energy drinks, colas, sweetened coffee or tea, and fruit or vegetable drinks containing less than 70 percent natural fruit or vegetable juice. The bill does not target milk or milk products, infant formula, and oral rehydration solutions not marketed as sports or energy drinks.

To see Senate Bill 1289, click here

In Hawaii there are about 24 companies who are listed as manufacturing, or in some way being involved with, the production of soda and other carbonated beverages. The group No Hawaii Beverage Tax (NHBT), comprised of at least 60 beverage manufactures, restaurants, groceries, mini-marts, and other businesses, is leading opposition to the bill.

NHBT’s main point of contention is that Hawaii residents are already over-taxed—pointing to our General Excise Tax. The group also says that targeting soft drinks, juice drinks, teas, and other beverages is discriminatory to the working class. By singling out items normally seen in grocery carts, NHBT says, low- and middle-income families will feel the economic pinch hardest from higher prices.

Also in opposition to SB1289 is the Hawaii Restaurant Association (HBA), with over 3,500 locations employing 82,000 people. HBA’s Government Relations Committee said in testimony on the bill: “The result is less money for food in order to satisfy the State coffers. This in turn will result in less consumption, then in fewer sales for the many restaurants and small businesses, and fewer jobs here in Hawaii.”

Kent Kurihara of Hawaiian Sun Products, Inc. testified that the local soft drink company would be forced to lay off its workers due to the decline in sales coming from a beverage fee.

“Our company employs and cares for over 115 hard-working individuals, and by extension their families as well,” Kurihara said in testimony. “I am certain that with any more taxes on our industry and the subsequent loss in sales, we will be forced to lay off workers, and reduce the hours for the remaining staff. With the reduction in sales, our budgets for many operations will be reduced, and our suppliers and vendors will undoubtedly feel the cutbacks, too.”

The Tax Foundation of Hawaii said in its testimony that “the use of the tax system as a social tool in its attempt to deter the sale of alcoholic products and sugary beverages is an inefficient use of the tax system. It should be noted that Hawaii’s tax rates on alcoholic beverages are among the highest, if not the highest, in the nation. This increase in liquor tax rates would reaffirm the perception that Hawaii is a tax hell.”

The Hawaii Department of Taxation Monthly Tax Collection Report lists the amount of tax collected on alcohol for the 2010 to 2011 period as $23,157,940.22.

To see current alcohol taxes by the State Department of Taxation, click here

Under SB1289, alcohol, spirits, wine, and coolers would see increases effective July 1 as follows:

* $5.98 per wine gallon on distilled spirits increased to $8.97

* $2.12 per wine gallon on sparkling wine increased to $3.18

* $1.38 per wine gallon on still wine increased to $2.07

* $0.85 per wine gallon on cooler beverages increased to $1.28

* $0.93 per wine gallon on beer other than draft beer increased to $1.40

* $0.54 per wine gallon on draft beer increased to $0.81

The Tax Foundation of Hawaii also urged lawmakers to focus on proper health education, if its concern is truly about encouraging the public to make healthy choices.

“If the intent [of SB1289] is to promote healthier eating patterns, then the goal can be achieved only with education and understanding on the part of families to replace unhealthy choices with healthy choices,” Tax Foundation of Hawaii testified. “This proposal lacks understanding of what it takes to solve the problem of childhood obesity, high blood pressure, and diabetes and focuses only on sugary beverages as the cause of the problem, at the very least it is myopic.”

Health related organizations in Hawaii, however, testified in favor of SB1289’s intent. In particular, the American Heart Association recommended that the tax include all sugar-sweetened beverage syrops sold, so as to increase the price charged for the sale of sugar-sweetened beverages found in fountains and automated machines. The American Heart Association also asked that a portion of the money generated go toward childhood obesity prevention programs.

Hawaii’s Healthy Mothers Healthy Babies also testified in support of the bill.

“Consumption of alcohol, particularly during pregnancy, results in serious health issues,” testified Healthy Mothers Healthy Babies executive director Jackie Berry. “Given the shortage of funding available to support programs, which deal with the effects of alcohol consumption or to support prevention programs to educate the public about the effects of alcohol consumption, it is an excellent idea to increase the tax on liquor.”

“Alcohol, like tobacco is a legal drug,” Berry further wrote, “but a drug none-the-less and should be considered a ‘luxury’ item for taxing purposes.”

SB1289 will next be heard by the Senate Ways and Means Committee.