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Massachusetts Debates Merits of Beverage Tax

Proposal moving through the state legislature would tax drinks based on sugar content; Philly beverage tax falls short of revenue expectations.
July 13, 2017

​BOSTON – Massachusetts residents could pay a significantly higher tax on beverages with added sugar, including soda and sports drinks. The proposal would tax drinks based on sugar content, so a 20-ounce soda would cost consumers an additional 40 cents in taxes.

While such taxes are supported by health advocates who target reduced sugar consumption to combat obesity and diabetes, the economic impact is substantial. The State House News Service reports that if Massachusetts lawmakers create a tax on sugary drinks, Polar Beverages’ $10 million investment in a new can line and water treatment system might become unnecessary.

“It would be stranded investments,” Polar executive Christopher Crowley told the News Service after a June 20 hearing on the proposed legislation. “It's an enormous undertaking, a three-year process and it's like, ‘Hey, now you don't need it.’”

Crowley and beverage industry representatives attended the Revenue Committee hearing to express their concerns about the legislation (S. 1562/ H. 3329), authored by state Sen. Jason Lewis and state Rep. Kay Khan, that seeks to create a tiered excise tax on sugary drinks. The news source writes that while the proposal would levy a 24-cent tax on a 12-ounce can of soda, the burden would be steeper on powdered drink mixes because the tax would be applied on a per-ounce basis once the beverage is mixed.

Kevin Dietly, a consultant for the American Beverage Association, said that if the policy takes effect, the cost of a 4C Iced Tea mix would skyrocket to $17.92 for a product that typically costs $3.99.

Meanwhile, public health advocates say that residents are already paying for over-consumption of sugary drinks through conditions such as diabetes and obesity, which they say create a strain the state's health care system. "This legislation, if passed, will improve the financial health of our state and the physical health of our children," said Bill Schmidt, the vice chairman of the Winthrop Board of Health.

Lisa Katic, a dietician who consults for the beverage industry, told the News Service that factors other than soda consumption have a greater contribution to obesity, such as a sedentary lifestyle.

State Sen. Michael Brady, co-chairman of the Revenue Committee, said he is considering both health and economic vitality. “Obviously we're in support of getting people healthier…but you don't want to hurt the employees in the working economy,” he told the News Service after the hearing.

In Philadelphia, which enacted its 1.5-cents-per-ounce tax on sugar-sweetened beverages in January, projected revenue from the tax are falling short of expectations, reports the PhillyVoice.com. The news source notes that outgoing City Controller Alan Butkovitz told Finance Director Rob Dubow in a letter that the tax is “creating a multi-million-dollar burden.”

“The city appears to be creating a short-term and long-term deficit through the beverage tax by not budgeting with true and accurate collection figures,” Butkovitz wrote. “The School District of Philadelphia encountered a similar problem when it implemented the cigarette tax. Initially, the school district budgeted $80 million in the first year. Unfortunately, it never reached that figure and has been on a steady decline since, generating less than $50 million in the current year.”

The news source continues that Philadelphia has averaged about $6.4 million a month in revenue since the tax was implemented, Butkovitz noted. Although the tax would generate about $77 million over the course of the year, that figure is well short of the projected $91 million annual figure the city is maintaining.