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Some Sweet, Others Sour on ‘Twinkie Tax’

A Colorado-based candy company and the state’s leading libertarian think tank believe Gov. Bill Ritter’s proposal to tax candy and soda is more bitter than sweet.
But Ritter has said that the so-called “Twinkie Tax,” which moved on to the Senate after being passed by the House Monday, allows him to spare further cuts to K-12 education while also keeping prescription drugs and most grocery items tax-free.
The proposed $50 million 2009-10 state budget rebalancing plan that Ritter announced last week seeks in part to eliminate the tax exemption for candy and soft drinks. The move is estimated to give the state $3.58 million more to work with this fiscal year, and provide $17.9 million in additional revenue the following year.
Rick Enstrom, regional manager for the Grand Junction based Enstrom Candies, said during a House Committee hearing that the tax on candy and soda would make it even more difficult for candy businesses like his to survive during the economic downturn. Enstrom testified that sales have already been down for his family’s candy company, and that the state levying the 2.9-percent state sales tax on his product would make a bad matter worse.
“The last thing we need or can afford in these difficult economic times is to negatively impact the price of our product to the consumer resulting in fewer sales and further reductions in earnings,” he said.
The Coalition for a Responsible Colorado, a lobbying group for soda companies opposing the proposed tax, said Monday that the tax would cost 370-800 jobs in businesses that produce and distribute beverages.
But at least one Colorado health group has come out in favor of the candy and soda tax. Maren Stewart, president and CEO of LiveWell Colorado, said in a statement that her group supports policies that limit the consumption of unhealthy food like soda and candy.
“The governor’s proposal to eliminate the sales-tax exemption for candy and soda will not exclusively solve the problem because it’s a very complex and complicated problem,” she said. “We are hopeful, however, that eliminating the exemption could lead to healthier choices.”
Meanwhile, Jon Caldara of the Independence Institute, a Golden-based libertarian think tank, argues that Ritter was elected to be the governor, not to be a nanny who decides which potentially unhealthy products should be taxed. He joked that after upsetting some Colorado drivers by raising car registration fees with FASTER, Ritter has now found a way to upset the kids of Colorado.
“This legislature will go down as the Grinches who taxed gumdrops,” he said.
For his part, Ritter said last week that the dire budget situation has forced him to make “unenviable choices from extremely limited options.” He believes that the “new economic reality” will require everyone “working together as stubborn stewards of taxpayer dollars to adjust, adapt and succeed.”
Ritter and fellow lawmakers have closed $2.1 billion in budget shortfalls over the past year and a half, and are facing a billion dollar shortfall in next year’s budget.
And while the so-called Twinkie Tax has drawn ire from conservatives and people in the candy and soda industry, a legal opinion issued last year said that such a tax would not be in violation of the Taxpayer’s Bill of Rights, which requires a proposed tax to be approved by Colorado voters.
According to Ritter’s office, 14 states tax candy but not groceries, while 15 states tax all food, including candy. If the state levies the 2.9-percent sales tax on candy and soda, a $1 candy bar would become a $1.03 candy bar.
Ritter originally proposed suspending the candy and soda tax exemption, as well as more than 10 other sales tax credit and exemptions, on July 1, 2010. But after legislative economists predicted an additional budget shortfall for the current fiscal year, he decided to push up the start date for eight of those tax increases to March 1, 2010. The move is expected to save the state $18.8 million in the current fiscal year budget.

Distributed by Colorado Capitol Reporters

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