Candy Taxes: Not So Sweet
A policy to change behavior leaves a loser in its wake.
This month, tax officials in Washington state will see the first evidence of whether its residents will suck, chew and slurp their way out of the state's budget crisis. Candy, gum, soda and bottled water lost their exemption from sales tax on June 1, after the state's elected officials proved they were prepared to tax almost anything to help close a voracious $2.8 billion budget shortfall.
Together these convenience store favorites are expected to raise $605 million in additional sales tax revenue annually. Mike Gowrylow, communications director at the Washington State Department of Revenue, says the numbers are startling at first blush. "Soda, candy, gum and bottled water," he says, "are consumed in surprisingly large quantities."
Candy alone is expected to add $30.5 million to state coffers each year, but a local long-time self-described confectionary man says the state has not counted the cost.
Pierson Clair is president and CEO of Brown & Haley, the 96-year-old Tacoma, Wash.-based manufacturing confectioner that gave the world Almond Roca back in 1923--what Clair describes as "a wonderful piece of celebration confection." Roca is a log-shaped piece of buttercrunch toffee coated in chocolate, topped with almonds, wrapped in gold foil and packaged in distinctive red tins.
He guards his company's recipes and reputation jealously, and insists that Almond Roca is food. "We buy 2 million pounds of butter. We buy 2 million pounds of California almonds. We buy 3 million pounds of sugar. We buy vanilla, and we buy soy lecithin. That's all that goes into Almond Roca. That is all food, and all we do is apply Washington labor. We cook it. How is that not food?"
The line of demarcation is around a single ingredient: flour. "The issue is black and white," Gowrylow says. "If a product does not contain flour made from grain, it is a candy and is subject to sales tax."
But Clair, who has headed Brown & Haley since 2003, won't buy the easy fix-on principle. "Quite frankly, any number of confectionary companies could add a little rice flour in. You wouldn't taste it. But that isn't the underlying value. The underlying value is taxation of food."
And confection is a food, Clair contends. "This has become an onerous tax because of disproportionate use of confection by the elderly, low income and children," he says. "It becomes a tax against those who can least afford it."
Moreover, he worries that candy is now being lumped with sin tax products. "The moment you say, 'We'll just add a little flour,' is the moment you say there is something wrong with confection," he says. "Confection is consumed at less than 2 percent of total calorie intake--probably someplace around 1.6 percent is confection--a miniscule proportion of the calories we take in a year to keep us running."
Clair says the appetite for a treat has helped keep the doors open at about 20 mid-sized confectioners in Washington state alone. "So clearly it is a little bit of fun and a little bit of pleasure. And to group that in as a sin just shows you--shows me--the disconnect between those who make laws and those who don't."
Gowrylow responds that it is "not our job to decide what is a sin. Our job is to collect the revenues the law requires." But he adds that the exemptions may prompt Washingtonians to make "healthier food choices." And that may ultimately be the heart of the matter.
Conventional wisdom holds that governments raise taxes for only two reasons--to increase revenue and change behavior. The candy tax will contribute only slightly more than 1 percent of the state shortfall. Together with gum, soda and bottled water, the new sales tax will be about a one-fifth down payment on what the state needs to balance the budget.
These are not insignificant sums, but the real value may be in the behavioral change they are intended to bring over time. The fiscal crisis allowed policymakers to levy punitive taxes against things that are bad for us or the packaging of which is bad for the environment.
All this would be an easier swallow if faceless multinational food conglomerates had to pay the tab. This was not supposed to be Clair's fight. He made his first batch of chocolate when he was 16 years old. Even as you hear the passion for his life's work in his voice, there is also the unmistakable sound of loss.