Wednesday’s meeting of the Kansas Senate Assessment and Taxation Committee heard testimony on SB 567, which would increase taxes on drinks sweetened with sugar. At the next day’s meeting, the bill didn’t advance out of committee.
Several hundred employees of soft drink companies, many wearing clothes with logos of their companies, were in the statehouse, and many attended the hearing.
In his opening remarks, Senator Les Donovan, a Wichita Republican, said that his intent is to revise the bill so that the tax is four-tenths of a cent per teaspoon of sugar instead of one cent, saying that to the audience of soft drink company employees “that should relieve 60% of your anxiety.”
He added, as he has said in other recent meetings of this committee, that he doesn’t want to have to ask people for more taxes. But he contended that the budget has been “slashed” many times, and that more tax revenue is required.
Proponents of the bill generally cited two reasons for their support: First, it would raise more revenue for the state. Second, it would improve the health of Kansans, a claim that some opponents of the bill disputed.
Kathy Cook, Executive Director of Kansas Families for Education Foundation, said the state’s children, disabled, and elderly can’t afford any more cuts. It’s more than a political decision, she said, it’s really now a moral decision. Her written testimony suggested increasing income taxes on those making over $100,000 per year.
Jason Eberhart-Phillips, the Kansas State Health Officer, said that sugar-sweetened beverages are “not a necessary part of anyone’s diet.” The drinks generally deliver many calories but few nutritional benefit.
Opponents of the bill raised the cross-border shopping issue. Written testimony from the Kansas Chamber of Commerce noted that “Our peer states are already salivating at the prospects of both a sales tax and a tobacco tax increase. You can now add the proposed doubling of the liquor gallonage tax and this bill to the list of tax increases our competitor states would like to see Kansas enact.”
The Kansas Beverage Association in its written testimony noted that the bill is not really about fighting obesity, as no money from the proposed tax is earmarked for obesity programs. (A California bill that is the model for this legislation places all the tax revenue collected in a fund for improving the health of children.)
The Association also said in its testimony that the American Beverage Association has set voluntary standards for beverages sold in schools, and that in three years, the number of calories from beverages sold in schools has been reduced by 90%. The testimony added that kids in schools are still eating pizza, cheeseburgers, candy bars, and ice cream.
The owner of a restaurant and bar in Olathe said that the competitive nature of the restaurant combined with the recession means that the ability to earn money on food sales is reduced, meaning that the beverage side of the business becomes more important. He said that this tax increase might drive him to reduce his employee count.
Some opponents noted the large number of businesses that would be affected by this tax, and the job losses that the tax would cause.
The fiscal note the accompanies the bill notes some difficulties in enforcing the tax: There are many distributors of the products to be taxed, and some don’t have a business location in Kansas. There are very small companies producing products that will have to be taxes, and there are private label products that are shipped directly to companies in Kansas. The note estimated that there could be 500 to 600 products that would be subject to this tax, and that ensuring compliance with the law may be difficult.
Senator Karin Brownlee, an Olathe Republican, said that the link between sugar pop and obesity is not clear. Taking issue with Chairman Donovan’s contention that revenues must be raised, she said that some legislators realize that spending is the problem. There were four years in a row, she said, where spending increased by 9 percent. “Until the state gets a handle on our spending, we don’t need to be talking about new taxes.” She asked that when businesses are not making money, how do we take more from them?
Donovan, who owns an automobile dealership, interjected that he will have to charge customers an additional three or four hundred dollars if the Kansas sales tax — based on his actions — is raised. “It’s not good for me, it’s not good for my business, but we are out of options, the way I see it.” He said he didn’t disagree with the claim of government bloat and that government spending has gone up faster than income lately, but the state has cut billions in taxes for both. business and individuals.
Brownlee said that it appears the majority is headed towards tax increases, but this should not be the first response to the budget problem.
The committee took action on this bill and other proposed tax bills on Thursday. As reported in Kansas Reporter and Kansas Liberty (Senate Committee says no to new taxes, House, Senate committees take a stand against increasing taxes) the tax bills did not advance out of committee.