Sugary drinks could be taxed at 2-cents per ounce under a proposal in the House of Delegates. If passed, the charge could raise $450 million or more for child care subsidies, free meal programs and the state’s general fund, advocates say. (Photo by Bryan P. Sears/Maryland Matters.)
Maryland lawmakers will be asked to sweeten the state’s coffers by adding a tax on sugary drinks projected to raise nearly $500 million annually.
If passed, Maryland could become the first state to tack a 2-cents per ounce tax on sugary drinks, syrups and powders. The money raised would be earmarked for free school meals, child care subsidies and the state’s general fund.
“We have significant funding shortfalls for very high-priority programs in our state, and we also have on top of that, a public health crisis,” said Del. Emily Shetty (D-Montgomery), lead sponsor of the measure. “Our health care costs are going up. We have significant enrollment in all of our health care programs, which is a good thing, but we can’t only address health costs on the back end.
“We have to think about common-sense, evidence-based measures that help bring down costs for our health care system, and that includes efforts like this,” said Shetty, a member of the House Appropriations Committee.
Her measure, House Bill 1469, is co-sponsored by House Health and Government Operations Chair Joseline Peña Melnyk (D-Prince George’s and Anne Arundel). There is no Senate version of the bill.
The so-called “For our Kids Act” is similar to laws in Philadelphia, Seattle, Boulder, Colorado, and Berkeley, Calif.
House Minority Leader Del. Jason C. Buckel (R-Allegany) said the fact that Shetty and Peña-Melnyk are on the bill means it is “more than just a sort of trial balloon from the proverbial far left field.”
“We certainly take it seriously. It’s not a proposal from a backbench kind of person,” he said.
As proposed, the bill would impose a tax on distributors of sweetened drinks. Powders and syrups would also be taxed based on the total ounces of drink that each container could make.
Automatic annual increases in the bill are tied to inflation. In years when there is negative inflation, the tax rate would remain the same but not decrease. The proposal is similar to how the state calculates gas tax rates each year.
The tax is based on volume rather than sugar content.
In addition to the municipalities that have passed sweetened beverage taxes, some states have considered similar measures but none have so far passed it into law.
Shetty modeled her bill on a 2017 Philadelphia law that raised more than $400 million in fiscal 2022.
The bill earmarks $189 million of any Maryland tax for free breakfast and lunch programs for every public school student and qualifying private schools. Another $50 million is set aside for state child care subsidies. The law requires that the money not supplant current budget allotments.
The balance of the money — about $210 million — would go to the state’s general fund.
“I fully support the goal of making Maryland healthy again, including efforts to reduce sugary drink consumption,” said Del. Kathy Szeliga (R-Baltimore County). “However, any new tax must be offset by an equal reduction in total sales tax. If this is truly about public health — not taxes — it could be a win-win by improving health while lowering taxes for all Marylanders.”
Buckel called the proposed levy another sin tax at a time when people are still feeling pinched economically.
“It’s kind of jarring to suggest that, at a time when we talk about everyone’s cost of living going up so much, and there’s a rally every week about how we have to protect and work for people who are struggling financially, they’re initiating higher sales taxes on sort of staple products, or however you feel about soda,” he said. “The truth of the matter is, a lot of people drink soda, either a lot or at least somewhat.”
Shetty said consumers would have a choice and soft drink purchases “are optional.”
“They are not a required part of anyone’s diet,” she said, adding the tax is “a bit of a win-win.”
“Either it helps incentivize that moment where people think about whether or not it’s worth buying, or if it is something that they want as a treat,” she said. “Nothing would prevent them from doing that. Then we’ll get the revenue to be able to support school meals for children and child care scholarships for those who need them.”
Gov. Wes Moore (D) and the General Assembly are looking to tame a $3 billion projected budget deficit. Added to that are concerns about cuts to programs, and a proposed freeze on child care subsidies. Moore and lawmakers are also worried about the threat of cuts to federal aid. Those cuts could add hundreds of millions — perhaps billions in a worst-case scenario – to the budget problem.
The bill has the backing of the American Heart Association.
Laura Hale, a lobbyist for the association, said the Philadelphia tax has been “an amazing benefit for public health, as well as for investments in the city. They’ve actually gained jobs because they invested in early child care. Having that permanent funding has made a huge difference.”
“This can be a creative solution to make sure that we’re protecting and taking care of Marylanders during these times,” Hale said.
The proposal has drawn the ire of the soft drink industry.
“A beverage tax would raise prices dramatically on everyday grocery items at a time when Marylanders are already struggling to afford higher costs for necessities from food to housing to utility bills,” according to a statement from the Maryland-Delaware-DC Beverage Association. “There could not be a worse time to burden working families and small businesses with yet another expense that hurts those who can least afford it the hardest.
“There are better ways to fund budget priorities than imposing a new tax on top of the state’s 6% sales tax, raising prices as much as 60% on some beverages,” the statement said.
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