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Sugar Tax Pushed in Vermont as Way to Pay for Health Reform Costs

White River Junction — A coalition of health advocacy groups and hospitals in Vermont want to tax sugary beverages as a way to fight obesity and perhaps help pay for health reform initiatives in the state.

Dartmouth-Hitchcock Medical Center and Gifford Medical Center are among 38 organizations who are backing the idea, which would add a penny per ounce to the cost of sodas and many types of juice.

Legislation is being crafted now and should be introduced in the coming weeks, said Tina Zuk, government relations director at the American Heart Association, which is leading the effort.

A similar proposal last year never made it out of the House Ways and Means committee in Montpelier. But the growing concern around childhood obesity and the potential to offset costs related to reforming Vermont’s health care system suggest that passing the tax stands a better chance of passing this year, Zuk said.

“This year, it seems there’s greater interest in the issue,” she said.

Vermont consistently ranks among the healthiest states nationally, but residents of the Green Mountain State have struggled just like people throughout the nation to manage weight gain. More than half of adult Vermonters, 60 percent, were considered overweight or obese in 2011, according to the Centers for Disease Control and Prevention. The problem is also present with for children, with 27 percent of kids between the ages of 10 and 17 considered overweight.

Carrying too much body fat can lead to a variety of health complications, including heart trouble and increased risk for certain diseases such as diabetes. It was for this reason that New York Mayor Michael Bloomberg recently pushed through a ban on super-sized sugary drinks in city restaurants, concession stands and other eateries. And more than 30 states, including California and New York, have imposed excise taxes or sales taxes on sugary drinks to raise revenue for health care and other purposes, according to the Center for Science in the Public Interest.

There are a lot of reasons why more people are becoming overweight, including lack of exercise and poor eating habits, health officials say. But consumption of sugary drinks is believed to be a major culprit.

“(Sugary beverages) have no nutritive value other than giving calories,” said Lou DiNicola, a longtime pediatrician at Gifford and president of the Vermont Academy of Pediatrics.

Gifford and DHMC have banned such drinks from the cafeteria and vending machines at their hospitals, decisions that officials said were aimed at “walking the walk” in their messages about healthy living and diet.

The next step toward lowering consumption of sugary drinks is an excise tax like the one being proposed, DiNicola said.

Unlike sales taxes, excise taxes are often included in the price of a product, rather than at the point of sale. So a consumer would notice the price increase before it is rung up at the cash register, and perhaps be less likely to buy the drink.

A penny per ounce may not sound like much, but 12 cents added to the cost of a can of Coca Cola — or 72 cents on a six-pack — is a significant bump in price, Zuk said. Particularly for low-income residents, where the rates of obesity are higher, a tax like the one being proposed would do a lot to lower the amount of non-nutritious drinks people consume, she said.

“We hope this will serve as a deterrent to many of the groups that are most price sensitive, particularly low income residents and kids,” she said.

Advocates for low-income Vermonters have joined health officials in calling for the tax. It is the first year that the Vermont Low Income Advocacy Council has taken a position on the issue. The reason why the Council is supporting the proposal is because of the potential to offset some of the rising costs for low-income Vermonters when the state switches to a health exchange next year, said Karen Lafayette, legislative liaison for the Council.

Catamount Health and the Vermont Health Access Plan, which are low-cost state insurance plans for working Vermonters, will end when the insurance exchange gets up and running on Jan. 1, 2014. At that time, the out-of-pocket costs may go up dramatically for the approximately 30,000 people who are on those plans, according to the nonprofit Vermont Campaign for Health Care Security Education Fund, which helps people enroll in the insurance programs.

Those enrolled with Catamount Health, for example, could see their out-of-pocket expenses shoot up as much as $6,250 year, according to the nonprofit group.

Establishing a sugar sweetened beverage tax in Vermont would raise an estimated $26.7 million, according to the Yale University’s Rudd Center for Food Policy & Obesity.

Advocates of the tax say the money raised could go toward helping low-income residents cover the price increase for insurance.

“The biggest reason (the Council is supporting the tax) is the revenue would go to fill the gap for people coming off VHAP and Catamount,” said Lafayette.

But not everyone is buying the argument over the potential benefits, including Gov. Peter Shumlin. He has refused to back the proposal, saying that education is a better way to combat obesity. He has also called it a regressive tax that effectively penalizes poor people who depend on sugary beverages as a source of cheap calories.

Retailers, furthermore, are worried about what it would mean for their own business, believing the tax would send potential customers to neighboring states like New Hampshire.

“Our concern, from a retail perspective, is that it’s a huge tax on consumers and it’s another item that could have an impact on sending customers across the border to avoid taxes,” said Jim Harrison, president of the Vermont Grocers Association.

Zuk doubted there would be much of an impact on cross-border sales, pointing to a University of Vermont survey that found most people said they wouldn’t travel to New Hampshire in order to save money on soda.

To Shumlin’s point about it being a regressive tax, Zuk and DiNicola said low-income groups actually have much to gain. Not only would their health improve, but the tax revenue could be used to subsidize the purchase of fruits and vegetables for people on government assistance and subsidize school meals.

There are many ways the state could use the money, including repairing damaged infrastructure from Tropical Storm Irene. But DiNicola said it would be best used on improving public health. Do that, he said, and the tax is quite progressive.

“We’re not using the money to build roads or bridges,” he said. “We’re spending it on health care.”

Chris Fleisher can be reached at 603-727-3229 or cfleisher@vnews.com.