Renee Loth

The sweet taste of taxes

By Renee Loth
February 5, 2010

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AS IF Massachusetts liberals aren’t traumatized enough, here comes Governor Patrick with a plan to tax candy and soft drinks. Progressives have always been proud of the fact that the Massachusetts sales tax exempts food, taking the sting out of a consumption tax that disproportionately affects the poor. Now Patrick wants to lift that exemption for unhealthy food choices favored - let’s face it - by some of the same lower-income families. What’s a good liberal to do? House Speaker Robert DeLeo already has given two thumbs down to the sugar taxes, but the Legislature has been known to walk back from such lines in the sand before. Massachusetts is one of only 12 states that don’t tax candy and sugary drinks, and the state certainly could use the revenue. Applying the 6.25 percent Massachusetts sales tax to soda and candy could reap up to $52 million, according to the governor’s office. That would pay for a lot of school vaccinations or child nutrition programs. The no-fun nannies at the Center for Science in the Public Interest put the estimated take even higher - at $83 million. But the advocacy groups’ definition of what it calls “liquid candy’’ includes fruit juices, and Patrick’s proposal does not.

Why not? No one would say it for the record, but when Patrick tried this last year, he included not just sodas but sugary juice drinks with less than 50 percent real fruit. Oops. That would include some products from Ocean Spray, made in Massachusetts.

It’s just one more example of the devilish dance budget writers have to perform when broad-based tax increases are off the table. Instead, policymakers titrate the complex formulas of small tax incentives and exemptions to get maximum revenue with minimum backlash. The balance has to be just right: if so-called “sin taxes’’ are too effective and drive people away from buying the dastardly products, revenues drop. Trying to square these circles can contort tax laws into pretzels - sometimes literally. Illinois adopted a new sales tax on candy last year, but if a product contains flour, it is classified as cake, not candy, and is exempt. Thus the sales tax applies to Hershey bars but not Kit Kats; to yogurt-covered raisins but not yogurt-covered pretzels.

It’s always dicey when the government tries to drive human behavior. Still, the federal and state tax codes are rife with such carrots and sticks, from the home mortgage deduction to the state’s tax incentive for the film industry (which Patrick also wants to cut) to high taxes on cigarettes. Most taxpayers learn to live with them.The problem is the crazy quilt of regulations, exemptions, and definitions. Representative Jay Kaufman, House chairman of the Committee on Revenue, has been traveling the state in public discussions with taxpayers, trying to develop some rational standards for the state’s hundreds of taxes and tax breaks. One good idea: Have all new revenue proposals (including special tax breaks) stand for review periodically, to see if they have outlived their usefulness.Consumers tend to get into a particular froth about sin taxes, railing against a big-brother state that restricts their personal freedoms. They correctly note that candy and sodas are legal products and aren’t harmful when used in moderation. Exactly: use them in moderation and contribute a moderate price; abuse them and pay more. Besides, the behavior-mod aspects of this tax are aimed mostly at children, and society generally accepts a tighter rein on minors, from movie ratings to seat-belt laws.

It’s no secret that the American diet, heavy on fat and sugar, has fueled an obesity epidemic that costs states billions in health care costs. The percentage of Massachusetts adults with Type 2 diabetes, associated with obesity, has nearly doubled in the last 10 years. Patrick’s proposal channels the tax revenue to a health and prevention fund that pays for obesity prevention, childhood nutrition, and other health programs. There is a nice internal logic to a tax on unhealthy products supporting programs to make citizens healthier.

So liberals can expunge their guilt over chipping away at the food exemption. Taxing cheap, empty calories is good public policy after all. Now, a tax hike on lattes: that would be a serious sacrifice.

Renée Loth’s column appears regularly in the Globe.

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