Study: burden of new tax too heavy

Posted Oct. 08, 2008, at 11:09 p.m.

The doctors and others who oppose Question 1 — the ballot initiative that would repeal a new beverage tax on soda, beer and wine designed to help pay for and expand DirigoChoice — say the tax would cost Mainers mere pennies per drink.

But those who want the initiative, or People’s Veto, to pass insist that the excise tax’s actual costs would be much higher — and now they have a study by a University of Maine economist they say proves it.

“It’s bad enough to impose a new tax at a time like this, but it’s even worse than it looks,” Maine House Republican leader Josh Tardy said Wednesday.

According to the study done by Todd Gabe, associate professor of economics at UMaine, the financial burden on Mainers if the initiative fails would be worse than what the Legislature estimated. Fed Up With Taxes, the political action committee behind Question 1, paid the university almost $21,700 to help fund the study.

Gabe estimated that Mainers would pay $40 million in additional taxes on beverages per year and therefore spend less on drinks. According to the study, this would lead to an estimated statewide reduction in “sales revenue” of $26 million per year, and the loss of 395 full- and part-time jobs.

Many who support Question 1 find this troubling, including Kristine Ossenfort of the Maine State Chamber of Commerce.

“I think what’s of significant concern to us is the possible loss of jobs,” Ossenfort said Wednesday.

Others against the tax also take exception to its scope, saying that it wouldn’t affect just wine, beer and soda, but almost every beverage that’s not pure juice, pure water or milk.

“It’s a massive tax. It’s going to hit every refrigerator in the state of Maine,” Newell Augur, the spokesman of Fed Up With Taxes, said earlier this week.

According to an analysis from the Maine Legislature’s Insurance and Financial Services Committee, the new tax should raise about $17 million in the 2009 fiscal year.

The tax would replace the unpredictable, controversial Savings Offset Payment as a funding source for Dirigo-Choice, the health insurance programs that have a roughly $50 million annual operating budget and serve 18,000 people and small businesses in Maine.

Edie Smith, the spokes-woman for the No On 1 coalition, said she thinks that the new economic impact study overestimated the amounts of soda and other drinks consumed by Mainers.

Mainers drink 28.4 million gallons of beer and 3.8 million gallons of wine each year, according to the excise taxes collected. Gabe estimated that each Mainer also consumes 52 gallons of soda, sports drinks and other taxable beverages per year.

“We think they inflate the consumption rates,” Smith said.

She argued that the tax should be upheld because the programs it would support are too valuable to cut. She said that DirigoChoice has a 1,500-person waiting list and that the beverage tax would allow them to join the program. It also would pay for a project to lower the cost premiums of the individual health insurance market, which would help 40,000 people who now are paying for their insurance.

“You have to look at the whole package,” she said. “How’s it going to affect me as a person? It comes down to those pennies.”

acurtis@bangordailynews.net

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