Daily Archives: February 16, 2015

The New Hampshire Chimera

See also previous post, “The Bag Man carries a heavy load.” 

The Monster of Jim Harrison's nightmares.

The Monster of Jim Harrison’s nightmares.

Previously in this space, I examined the various arguments against a proposed tax on sugar-sweetened beverages unleashed, helter-skelter, by Jim Harrison of the Vermont Retail and Grocers Association. But I saved the best for last: his frequent invocation of the great mythical devourer of Vermont businesses, the New Hampshire Chimera.

Yes, every time someone proposes a new tax or tax increase, its opponents summon the spectre of businesses shuttering en masse and countless jobs fleeing to the tax haven on our eastern border. There’s some truth in this dire outlook — just enough to keep the fear alive — but far less than its proponents would have you believe.

Let’s start with population. Fewer than 170,000 Vermonters live in the counties that border New Hampshire. Most of those people live close enough for major shopping excursions, which is why you see relatively few large malls or superstores on the Vermont side. That’s a tangible loss to our economy, but its true value is questionable: most of the jobs are low-quality, and we avoid the environmental costs of large-scale retail development. (Just look at the West Lebanon strip. Bleurgh.)

For more casual shopping, such as picking up a few groceries, filling your gas tank or getting a snack, a much smaller fraction live close enough to the border — say, five miles or so. Any more than that, you’re not going out of your way for a quick stop.

Now there’s the matter of crossing the border. There are long stretches where you’d have to travel five miles or more to access the nearest bridge.

Then you come to shopping availability on the other side. The scaremongers see a New Hampshire border bristling with retailers from Canada to the Massachusetts line. In fact, there are three major retail zones in western New Hampshire: Littleton, West Lebanon, and Keene. Otherwise, there are long stretches of Not Much.

Once again, the greatest impact of higher Vermont taxes is not on the mom-and-pop stores so dear to the rhetorical heart of Jim Harrison; it’s on the supermarkets, megamarts and strip malls that you can find in those three retail hubs. And nowhere else.

In sum, New Hampshire is a major draw for mega-shopping, but it’s a relatively minor threat to other economic activity. And border communities with some creativity, like White River Junction and Brattleboro, find ways to juice their economies even in the shadow of the New Hampshire Chimera.

(Harrison likes to throw in Massachsetts and New York as well, but they are no threat. Their taxes are also pretty darn high; relatively few Vermonters live near those borders; and there’s virtually no destination shopping within easy driving distance in either state.)

Given all of these factors, New Hampshire looks like a much smaller threat than it is in the mind of Jim Harrison. There is no reason for us to be a captive of our neighbor’s policies. We should set our tax policies on their own merits, not out of fear of New Hampshire.

Let’s take an example right out of the Jim Harrison playbook. Here’s one of his vague-on-details anecdotes:

Two years ago, the legislature needed some more money for roads and bridges. They increased Vermont’s gas tax. At that time, the gas tax was 13 cents more per gallon than it was in neighboring NH. Within months, four gas stations on the Vermont side of the Connecticut River Valley closed.

Wow. That’s an oddly specific and limited horror story. It raises a host of questions.

— Where, exactly, were these gas stations?

— Can a direct line be drawn between their closures and the gas tax hike?

— If they closed “within months,” were they marginal businesses before the gas tax took effect? It sure sounds like it.

— Had any of them been planning to close anyway? Small businesses do tend to come and go at a rather alarming rate under any circumstances.

— How many gas stations are there in that zone? I’m guessing several hundred. And while the closure of any business is a sad thing, four is a pretty small number by comparison.

— If the gas tax increase had that great an impact, I’d think the closures would have continued beyond “within months.” Did they, or was the damage limited to four?

And finally…

— Is Harrison saying we shouldn’t have raised the gas tax? If not, then what exactly is he arguing for?

He would probably reply that border convenience stores have already taken a hit, so we shouldn’t hit them again. That’s an arguable point, but how much of a gas station’s business consists of customers buying sugary drinks and nothing else? If the gas tax didn’t chase them across the border, why would a tax on sugary drinks, which represent a smaller slice of their business?

The more likely outcome, it seems to me, is that customers will pay the extra freight or switch to unsweetened beverages — diet sodas, iced tea, flavored waters. There’s quite a variety of drinks with no added sugar. Dairy drinks, even with added sugar, wouldn’t be covered by the tax. Coffee wouldn’t be, no matter how sweet you like it. (Smart retailers will load up on the non-sugary options and feature them in shelving and advertising.)

This is especially true for the typical convenience store stop: filling the tank, using the restroom, buying a drink for the road.  The drink is one small part of the equation. And again, if you’re not going to New Hampshire for the cheaper gas, you’re not going there because your Coke costs an extra quarter.

The bigger burden of a beverage tax would fall on — say it with me, children — Big Retail. Places you go when you want a 12-pack or a case or some two-liters at the lowest price. You wouldn’t drive an extra ten miles to save a quarter on a Mountain Dew, but you would to save a few bucks on a case as part of a big trip to the supermarket.

Which is the point I made in my previous post: the tax poses the biggest threat to Big Retail and Big Beverage, and they’re the ones providing the big money behind the opposition to the beverage tax. The mom and pops are the poster children, but their actual victimhood is significantly limited.

And if you’re worried about the loss of Big Retail in Vermont’s economy, bear in mind that the border regions are largely empty of Big Retail. They’ve already departed for the low-cost option.

In sum, there is a cost to the beverage tax. It should be considered as part of the equation. But the effect is nowhere near the monster that inhabits Jim Harrison’s dreams. And it should not be a decisive consideration in the coming legislative debate.

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The Bag Man carries a heavy load

Listening to Jim Harrison on VPR’s Vermont Edition last Friday led me to one inescapable conclusion: as a public debater, he makes a mighty fine bagman.

Harrison, for those with a bliss-inducing level of ignorance about Statehouse matters, is one of the most effective lobbyists in Montpelier. Harrison heads the Vermont Retail & Grocers Association, and his current bête noire is the proposed two-cents-per-ounce tax on sugar-sweetened beverages.

The recommended daily allotment of sugar is 8 teaspoons for a male adult, 6 for a female adult, and 2-3 for a child.

The recommended daily allotment of sugar is 8 teaspoons for a male adult, 6 for a female adult, and 2-3 for a child. So go ahead, kids: Enjoy your daily two ounces of Coke!

Harrison appeared on VPR with the chief pro-tax lobbyist, Anthony Iarrapino of the Alliance for a Healthier Vermont. Harrison’s presentation was pretty much all over the place: he’d shift from one prehashed talking point to another with not even an attempt at segue, he pulled trusty (and rusty) anecdotes out of his back pocket; he’d throw multiple talking points into a single answer, making it impossible to examine them closely. His overall approach could be summarized as, “Throw everything at the wall and hope something sticks.”

If you summed up all his various statements, it’d go something like this:

— The tax will do nothing to change behavior.

— The tax would be the death knell for countless independent businesses.

— Soda consumption is already trending downward, so we don’t need a tax.

— The tax won’t work because people will just shop where the beverages are cheaper (i.e. New Hampshire).

— There is “no comparison” between tobacco and sugary drinks. So the success of the tobacco tax at reducing smoking says nothing about the potential impact of a beverage tax.

Is your head swimming from all the contradictions? It should be. But I feel for Harrison, because he’s basically defending the indefensible: the right to sell grossly unhealthy drinks at the lowest possible price. When, in reality, sugary beverages are artificially low in price because the corn and sugar industries benefit vastly from federal handouts and favorable tax policy.

Harrison’s favorite argument boils down to “We’ve got to compete with New Hampshire.” There’s so much to say about that old canard, I’m going to tackle it in a separate post. For now, let’s focus on Harrison’s other recurring theme: It Won’t Work.

“This is a social experiment. No other state has done anything like this.” True enough, but we do happen to have a wonderful example of a sugary-beverage tax at work. On January 1, 2014, Mexico imposed a one-peso-per-liter tax (about 7 cents) on sugary drinks. The move came in response to rapidly climbing rates of obesity and diabetes. The results? A University of North Carolina researcher is working with Mexican officials on that question, and here’s what they found:

… preliminary results show that during the first three months of 2014, purchases of sodas and other taxed beverages declined by 10 percent compared to the same time period last year.

Meanwhile purchases of untaxed drinks, like 100 percent fruit juice and milk, went up 7 percent, and purchases of bottled water went up 13 percent.

If that’s not enough, the Wall Street Journal reports that a survey of Mexicans found that they are drinking fewer soft drinks, and are more aware of the link between sugary beverages and health problems since the tax was imposed. Another survey indicated that more than half of all Mexicans had cut back on sugary drinks.

Also, Coca-Cola’s biggest Mexican bottler reported a 6.4% sales drop in the first half of 2014 compared to the same period in 2013.

Those are impressive results for the early days of a relatively small tax. Vermont’s would be eight times as large. Imagine the impact it would have on sales of sugary drinks. (Again, I’ll deal with the cross-border argument in a later post.)

As for the comparison with the tobacco tax, Harrison really didn’t have an answer. The tobacco tax has, indeed, helped to drive down smoking rates. He didn’t try to argue that point; he simply bristled at the notion that tobacco and sugary drinks are in the same category.

Well, obviously, they’re not. They’re closer than Harrison would like to admit, but tobacco is clearly a bigger health threat. However, the real comparison isn’t “how bad is it for you?” It’s “Will a tax reduce demand?” On that question, the success of the tobacco tax is strong evidence that a beverage tax will work. Just in case Mexico isn’t enough for you.

Whenever Harrison is fighting a fee, tax, or regulation, he brings out the mom-and-pop types who are, as he puts it, constantly teetering on the brink of oblivion. “Most of our members are smaller, independent stores,” he says. That’s true if you count every store as one. But if you count total sales, the supermarket and megamart chains far outweigh the small independents.

And it’s not the moms and pops who put up the $600,000-plus spent on defeating a sugary-beverage tax in 2013, and are spending hundreds of thousands more this year. No, that money comes from Big Retail and Big Beverage. The moms and pops are politically convenient props.

Harrison also cited some statistics showing that soda sales have trended downward in recent years, and used that fact to question the link between sugary drinks and rising rates of obesity and diabetes. The problem there is, not all sodas are sugary (DIet Coke, et al.) and not all sugary drinks are sodas. And while it’s true that soda sales are dropping, sales of non-carbonated sugary drinks are through the roof: energy drinks, sports drinks, “juice” drinks containing very little juice, sweetened iced tea, etc.  It’s not just soda that represents a public-health threat; it’s the vast cornucopia of sugar-laden beverages on the market.

There were many more points in Harrison’s presentation. Each of them sound plausible when presented in a rapid blur of talking points, but all are full of holes when inspected more closely.

Coming soon to this space: “The New Hampshire Chimera.”