UMaine Economist Calculates Tax and Job Impacts of New Beverage Taxes

The purpose of this study is to examine the fiscal and economic impacts of the new and increased taxes on malt liquor (i.e., beer), wine and soft drinks imposed by Public Law 629. By fiscal impacts, we mean the increase in beverage taxes that would be paid by households and businesses. Our analysis suggests that Public Law 629 would lead to an estimated $40.7 million in additional beverage taxes per year. Economic impacts refer to the reductions in statewide economic activity (e.g., sales revenue, employment and income) that would occur as a result of the increased beverage taxes. Here, we find that – including multiplier effects – Public Law 629 would lead to an estimated statewide reduction in sales revenue of $26.3 million per year, with an accompanying loss of 395 full- and part-time jobs that provide $8.8 million in income (i.e., wages and salaries). Empirical results presented in this study are based on actual data and, in some cases, figures that are estimated using information from government and beverage industry sources. In addition, findings from published academic studies are used to make assumptions about the extent to which the beverage excise taxes imposed by Public Law 629 will raise retail prices and, in turn, how strongly consumers will respond to these price hikes. Results presented in this report are meant to be one piece of information, considered along with other economic and non-economic issues, used to inform the debate about Public Law 629.

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Economic Impact of the New Excise Tax on Flavored Water, Sports Drinks, Juice Drinks and Soda

• The new tax will cost Maine people and Maine businesses $30 million every year, not $11 million as the proponents of the tax have claimed.
• This tax is so broad, it will cover nearly every non-alcoholic beverage except milk, plain bottled water and 100% juice. That means tonic water, flavored water, club soda, teas and juice drinks will all cost more.  Maine Revenue Services Document
• Restaurants, event centers, sports facilities and convenience stores that sell fountain drinks will see their costs to serve non-alcoholic beverages increase by 35-40% directly as a result of this tax.
• The average cost of a typical 2 liter bottle of a non-alcoholic beverage will increase 25% as a result of this new tax.

Economic Impact of the Increase in the Excise Tax on Beer and Wine

• This new tax more than doubles the existing excise tax on beer and wine. It will cost Maine people an additional $10.6 million every year.
• Maine already has the highest tax on beer of all the New England states. This new tax will give it the highest tax on wine as well.
• This new tax sticks Maine with the 4th highest beer taxes in the country and the 13th highest wine taxes in the country.

Economic Impact of the 1.8% Tax on Health Insurance Claims

• This new tax adds $36 million to the cost of health insurance in Maine.
• Health insurance costs in Maine are already some of the highest in the country.
• Maine businesses and their employees need relief from the high costs of health insurance and they need it now.
• Adding an assessment on health insurance costs only makes health insurance more expensive and puts it farther out of reach for people struggling with these costs.

The Dirigo Health Program

• Passage of the People’s Veto does not eliminate funding for the Dirigo Health Program.
• No one covered by the Dirigo Health Program will lose their health insurance coverage as a result of the People’s Veto. This fact was acknowledged by the Executive Director of the Dirigo Health Agency at its Board of Trustees meeting on May 20, 2008.
• The Dirigo Health Program is an extremely expensive government program that covers only a small number of people, but costs the rest of Maine consumers a whole lot of money.
• The Dirigo Health Program was supposed to help the uninsured, but most of the people covered already had health insurance before they enrolled.

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