Outrage Grows in Empire State Over Governor's Soda Tax Proposal

By John DeGiovanni

February 17th, 2010

Clifton Park, N.Y., February 17, 2010 - New York State's vending operators, convenience store owners and consumers are among a legion of vehement opponents to Governor David Paterson's proposal to include a one cent-per ounce excise tax on non-diet soft drinks as part of the state's proposed 2010-11 budget.

Diet soft drinks are exempt under the proposed tax, which would be imposed on bottling companies at the point of production. Paterson originally proposed the tax last year, but it was soundly rejected by the state legislature.

The Governor's office estimates that the tax would generate approximately $450 million annually in an attempt to help close New York's $7.4 billion deficit -- and would aid in the state's efforts to fight obesity, while also making up for health care cuts proposed in the budget. New York State Health Commission James Daines is among the supporters of the soda-tax increase.

Michael Esposito is Division Manager-Vending/Office Coffee Service for Prestige Services (Clifton Park, N.Y.), a company that provides vending for approximately 200 locations in a territory that encompasses five New York counties and Rutland, Vt.

Esposito, who also serves as President of the New York State Automatic Vending Association, said that if the tax is included in the state's budget he will have to increase the price of his vended 20-ounce non-diet soft drinks from $1.50 to $1.75.

Up until a few months ago, Prestige Services was charging only $1.25 for a 20-ounce soft drink until New York State's "bottle law" went into effect, necessitating the price increase. And Esposito, like other vending operators in New York, doesn't want to raise his prices beyond the budget of customers in the money strapped Empire State.

But there may be light at the end of this tunnel. Based on feedback he's received from some elected officials, Esposito is growing confident that the New York State Legislature will, once again, vote down the tax increase.

"We're hearing from senators that it's not going to pass," the affable Esposito told VendingBiz.biz. "Enough people are opposing it right now - and the last time it was defeated by a great margin."

The effort to jettison Paterson's tax-increase plan is being spurred by a number of groups, including the NYSAVA, the American Beverage Association, the New York Association of Convenience Stores and New Yorkers Against Unfair Taxes.

Esposito was slated to present the NYSAVA's position on the proposal to a joint legislative health committee in the state capital of Albany on February 9, but other issues on the lawmakers' agenda that day prevented him from doing so. However, he will offer his testimony on February 22 or 23 in a meeting with the New York State Senate's Finance and Ways and Means committees, the heavy hitters in legislative money matters.

Esposito provided VBB with the testimony he will present to lawmakers. In part, it reads:

"With unemployment high, there are fewer workers in factories and offices. Since there are fewer workers in New York factories, stores and offices, there are less New Yorkers to buy our snacks and beverages.

"Many of our vending operator members are actually reporting 10 percent to 20 percent same- location sales declines. Our companies are tightening our belts, reducing overhead, and pinching pennies, just like other small businesses across our great state.

"And with this as a backdrop, we are very concerned about one of the options being promoted by some who would arbitrarily tax sweetened beverages as a means of paying for government services.

"Taxes in vending are difficult to implement. Due to the unique nature of our sales channel, vending has a very difficult time implementing a sales tax increase. Our products are sold in increments of five cents. When a tax is increased by a penny or two or three, we typically are not able to pass along that tax to our customer. Factories, offices and stores often set the prices we can charge for snacks and drinks. So increases are not allowed. And in all vending locations, in this economy, even if we want, we can't increase our prices. Our sales will decline too much."

Downstate, members of Westchester County's Board of Legislators are concerned that enactment of Paterson's proposal would be an incentive for beverage giant PepsiCo to flee the county and state for a more tax-friendly environment. And PepsiCo, apparently, has a lot of suitors.

"A place like PepsiCo is being courted by our neighbors in Connecticut. If they leave, it will be the latest casualty in Westchester. It will take thousands of jobs out of Westchester," Ken Jenkins (D-Yonkers), Chairman of the Westchester Board of Legislators, told VBB.

"[Losing PepsiCo] would be a tremendous loss for Westchester County and New York State. And for the local municipality, the town of Somers [where PepsiCo is headquartered], it would be devastating. The town would lose its revenue stream from PepsiCo. . . . It will have a multiplier effect."

Jenkins believes that New York needs to look at other means to address its financial dilemma -- such as subjecting the state's budget to "further review" and making cuts "when appropriate."

"This proposal has been floated without regard for the devastating economic impact of raising more taxes on the food and beverage industry. A soda tax will drive many of our Fortune 500 businesses throughout Westchester right out of the state and cost Westchester County thousands of jobs. I would sincerely call upon the Governor to reconsider this option," Jenkins added.

Fellow Westchester County Legislator Gordon Burrows (R-Yonkers), who serves as Minority Whip, noted that Westchester is the highest-taxed county in the nation, and agreed with Jenkins' assessment that Paterson's proposal could open the floodgates to an exodus of businesses.

"We're already losing a tremendous amount of business to Connecticut, New Jersey and South Carolina, and Pepsi has been invited by a lot of people to relocate," Burrows told VBB.

"I just think it's unfortunate that elected officials fill in gaps with taxes for everything. It reaches the point of exasperation. You have seen the results nationwide with these tax-revolt parties.

We need to start cutting expenses."

Burrows also pointed to the $1 tax increase on a pack of cigarettes that Paterson has also proposed in his budget. At present, Empire State smokers pay a state tax of $2.75 per pack of cigarettes. New York City imposes an additional $1.50 tax per pack.

"When does it stop? Nothing is going to change things unless people start voting with their fingers now and they say, 'We want these guys out of office.' Until we see a lot of people voted out of office, nothing is going to really change," Burrows said.

Esposito noted that New York State's vending operators, suppliers and customers can send a message regarding the tax via the Internet to their local assemblymen and senators by copying and clicking on:

http://www.votervoice.net/Core.aspx?AID=1136&Screen=alert&IssueId=20371&SessionID=%24AID%3d1136%3aSITEID%3d-1%3aVV_CULTURE%3den-us%3aTARGETID%3dGtTmHW8r%2bek%3d%3aAPP%3dGAC%24.

Esposito summarized the NYSAVA's position on Paterson's tax plan.

"In this economy, don't tax working class New Yorkers' sodas. Aren't we going through enough that the legislature shouldn't be taxing our sodas? This is a tax on working class New Yorkers who are already facing enough. Don't tax New Yorkers' snacks."

The battle has begun.