A beverage company executive in Westchester said Gov. David Paterson”™s recently revived soda tax proposal would cause a 10 percent decline in overall soft-drink sales in the state and eliminate jobs across a broader swath of the business sector.?A coalition of business groups in Westchester and the Hudson Valley region has joined in opposing the proposed tax as a “job-killer” and potential obstacle to Pepsico”™s continued corporate presence here, said officials at The Business Council of Westchester and Hudson Valley Economic Development Corp.
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“The impact is very significant,” said Brian O”™Byrne, CEO at Hydrive Energy L.L.C. in Rye. His company”™s bottled energy drinks, which O”™Byrne said contain only 30 calories in a 15.5-ounce bottle compared to 180 calories for some energy-drink brands, would be subject to the proposed excise tax.
Calling it a measure to curb obesity and the substantial public health costs of obesity-related health problems, Paterson in his executive budget last month proposed an excise tax of $7.68 per gallon for beverage syrups or simple syrups and $1.28 per gallon for bottled soft drinks, powders or base product. That would amount to a cost increase for soft drinks of about 1 cent per ounce, according to the governor”™s office.
The proposed tax on sugared beverages, which follows Paterson”™s 2009 soda-tax proposal that died in the Legislature, would include those containing more than 10 calories per eight ounces, such as soda, sports drinks, energy drinks, colas, fruit or vegetable drinks containing less than 70 percent natural fruit or vegetable juice and bottled coffee and tea. Milk, milk products, milk substitutes, dietary aids and infant formula would be exempt.
The governor”™s office said soda-tax revenue would be dedicated to health care spending through the Health Care Reform Act, which finances more than $5 billion annually in health care costs.
O”™Byrne said the impact on shelf prices would be felt by consumers, with the cost of a 12-pack of soda going up $1.44. To boost retail sales, Hydrive just lowered its price point to $1.79 per bottle from $1.99. “If this tax goes, then we”™ll be back up to $1.99” and the company”™s repositioning strategy will be useless, he said.
O”™Byrne predicted sales of “big-sugar” drinks will be down about 20 percent if the excise tax is adopted. “Overall, I think beverages are going to be down 10 percent,” he said. “There will be some pick-up in the diet business. The sugar business will decline.”
“The soft drink business will decline by 10 percent,” he said. “That means there”™s 10 percent jobs gone. It”™s going to affect Pepsico. It”™s going to affect Hydrive. It”™s going to affect retailers and distributors.”
Calling the tax “a real job-killer in Westchester,” Paul Vitale, vice president for community and government affairs at the Business Council of Westchester, said a regional business coalition will lobby “very heavily” against it in Albany.
“It sends the wrong signal to businesses” and to the beverage industry in particular, Vitale said, which last year was hit by the state”™s expanded bottle-deposit bill and the Metropolitan Transportation Authority”™s new payroll tax. “Businesses cannot endure any more taxes to remain here and we can”™t enact any more taxes that make our area less competitive,” he said.
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“The soda tax,” said Michael Oates, president and CEO of the Hudson Valley Economic Development Corp., “will have a direct impact on thousands of jobs across the Hudson Valley.” Oates said the tax could influence Pepsi”™s decision on whether to keep its headquarters in Westchester. Pepsico Inc., based in Purchase, this year will complete its acquisition of Pepsi Bottling Group, which in recent years has been courted with financial incentives by Connecticut to relocate from its Somers headquarters. Pepsico officials have not commented on any long-term plans for PBG headquarters in the merger.
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“Pepsico has been such a prominent force on the corporate scene for a long time,” Vitale said. “We just don”™t want (the soda tax) to be the tipping point of losing Pepsi in the county.”
“This tax should not be singling out one industry,” Vitale said. “That”™s not the way to go.”
O”™Byrne, a former CEO of Yoo-Hoo/Orangina Beverage Co. called the proposed soda tax “kind of ridiculous” in its selective targeting. “They say sugar in beverages is a problem. Sugar in doughnuts ”“ is that not a problem?” If sugar is the demon, he said, “Why demonize beverages?”
Spokesmen for Pepsico and Pepsi Bottling Group referred questions about the soda tax to the American Beverage Association in Washington, D.C., a 91-year-old lobbying group for the non-alcoholic beverage industry.
“We have an ongoing effort to educate those citizens of New York and policymakers about what this tax would do to the beverage industry,” said ABA spokesman Christopher Gindlesperger. He said the industry has a $7 billion direct impact in New York. The tax on soda would be nearly nine times higher than the state sales tax on alcoholic beverages such as beer, he said.
In a statement responding to the governor”™s revived proposal, American Beverage Association President and CEO Susan K. Neely said the tax would add to the burden of already struggling families and “threaten thousands of well-paying New York jobs in the beverage and related industries. And its impact will reach beyond the beverage aisle, hurting New York grocers by driving sales to neighboring states.”
Rather than an effort to curb obesity and its costs, “This is a money grab, pure and simple,” Neely said. “It’s unfortunate that some are perpetuating the myth that taxing one product will make a difference in obesity. It won’t.” West Virginia and Arkansas ”“ two states with long-standing excise taxes on soda ”“ rank among the 10 highest rates of obesity in the nation, according to the Centers for Disease Control, she noted.
“This slash-and-burn attitude that Paterson has is not good,” said O”™Byrne at Hydrive. “I don”™t think this tax is well thought out.”
