Could a soda tax plugs exploding Louisiana deficit?
15th February 2016 · 0 Comments
By Christopher Tidmore
On last Wednesday, Louisiana’s looming fiscal crisis grew worse. The Revenue Estimating Conference, the state’s income forecasting panel, projected a deficit over $850 million for this fiscal year — $100 million higher than previous estimates.
The economists downgraded state tax revenue projections, saying collections across nearly all tax types are far lower than expected, predicting that the coming fiscal year’s deficit, beginning June 30, could be far worse than the previously expected $1.9 billion.
“We’ve got weakness in the corporate sector. We’ve got weakness in the personal income sector. We’ve got weakness in the sales tax sector. We’ve got weakness in the mineral sector,” explained Greg Albrecht, the Legislature’s chief economist.
Driving the downturn, Albrecht continued, is plummeting oil prices and the spill-out effect across the economy.
Moreover, just before Mardi Gras, La. House Appropriations Committee Chairman Cameron Henry pronounced much of Gover-nor John Bel Edwards’ sales and corporate tax hikes ‘dead on arrival’ without major budgetary reforms.
Edwards likewise ruled out cuts to the two discretionary parts of the budget. “I cannot support deep cuts to higher education and the elimination of critical health services that will result if we do not work together to tackle these budget challenges responsibly. Additional cuts would force colleges into financial exigency, lead to hospital closures across the state and prevent the state from delivering basic and critical services to its citizens…Washington-style politics have no place in Louisiana. I have asked even my most vocal critics to be solution-driven and compromise-oriented.”
As this newspaper outlined in the last edition, though, some of Edwards’ own supporters reject his tax hikes, just as surely as many Republicans acknowledge that closing every Louisiana hospital and university campus—and firing all personnel—would not close an $850 million deficit with just three months left to go in the fiscal year.
It may be time for Gov. Edwards to get creative on his tax increases—plucking a controversial concept from New York Mayor Michael Bloomberg, that is just quickly enough to draw votes from both sides of the aisle.
One of the more interesting tax suggestions, made by former State Representative Ebony Woodruff would employ a “soda tax” on high-sugar drinks to spare Health Care and Higher Ed from cuts.
Extrapolating from a model developed by former New York City Health Commissioner (and past Tulane University School of Public Health, Community Affairs Chair) Dr. Tom Farley, a one-cent per ounce tax on ‘high sugar’ sodas here in Louisiana would produce $293 million. Or put another way, at three cents per ounce, this tax would cover half of this year’s deficit, even in the three-month window it would be in effect for Fiscal 2015.
The problem is that such a three-cent jump would also double the price of a 20-ounce bottle of Coke or Pepsi from $1.25 to between $1.65 and $1.85.
Such an increase would cut into sales, and that is a potential long-term benefit. With Louisiana experiencing the highest rates of obesity in the nation — both childhood and adult — causing locally over 300,000 cases of diabetes per year, with an estimated 1,500 amputations needed and 800 who died from the condition each year, cutting sugar consumption seems to a reasonable idea for the Pelican State.
After all, it constitutes a tax no one would be forced to pay, because everyone could buy unsweetened beverages or drink water for free.
Yet, Woodruff’s idea has some sizable opponents, particularly amongst the very African-American Democrats upon which Governor John Bel Edwards would relay to pass the tax. Newly elected State Senator Troy Carter told The Louisiana Weekly during the election, “It would be a tax on the poor who don’t have a lot of options…It’s not the same as a cigarette tax.” Carter pledged his opposition, and the idea might be a bit radical for the state in such a short time.
And besides, when New York State Governor David Patterson tried to pass a scaled down soda tax, $.18 per bottle, at the time of a $15.4 billion deficit — the largest in the state’s history — even catastrophic cuts to education and health care could not stop the juggernaut to kill the “Coca-Cola Tax.”
That leaves only one way to plug the deficit in a three month period, a massive increase in sales taxes. As Revenue Estimating Confer-ence’s Dr. James Richardson noted to Gambit, “How do you get cash now? Only a few ways: One is raising the sales tax rate in the short-term, effective in April, which brings money into state coffers immediately.”
Currently, the Governor’s major tax hike proposal puts an extra penny on EVERY purchase of food, prescription drugs, and utilities. Forget Republicans. There is determined opposition in the Legislative Black Caucus to the idea. If sales taxes are the only means to garner money quickly, as well the only tax hike for which many Republicans will consider voting, could a ‘sin tax’ on high sugar drinks provide a solution?
As Woodruff noted, what is more regressive? To tax an apple and an Entergy Bill or to encourage children to choose water or fruit juice over Cokes?
This article originally published in the February 15, 2016 print edition of The Louisiana Weekly newspaper.