CNMI Legislature Approves ‘Sugar Tax’ On Beverages

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Pacific Islands Development Program, East-West Center With Support From Center for Pacific Islands Studies, University of Hawai‘i

Bill goes to governor for signature; cost of products to increase

By Dennis B. Chan

SAIPAN, CNMI (Saipan Tribune, April 28, 2016) – The House of Representatives yesterday passed a bill to tax sugar-sweetened beverages, powders, and syrups 4 cents per ounce, a move that was called "excessive" by business people, but praised by proponents as a good first step in combating health pandemics in the CNMI. The bill now heads to Gov. Ralph DLG Torres for action.

The public debate over House Bill 19-99 pitted business officials against public health officials who presented compelling and passionate arguments for both sides. Business people cited the immediate and real effects of 100-percent price increases and said jobs would be lost, while bill proponents stressed the health of the community and funds that could go to health programs.

Opponents of the bill said, among others, gave examples that a can of Aloha at 85 cents now would rise to $1.60 and that a can of iced coffee priced at $1.25 would grow to $2, while bill proponents cited examples of drops in tobacco use and profits after taxes were implemented, and noted that between 2011 and 2014, 756 deaths in the CNMI were attributed to non-communicable disease, with diabetes as one of leading causes of death.

It was 10 yes to eight no votes for HB 19-99. Voting yes were Reps. Joseph Deleon Guerrero (R-Saipan), George Camacho (R-Saipan), Angel Demapan (R-Saipan), Glen Maratita (R-Rota), bill author Felicidad Ogumoro (R-Saipan), Antonio Sablan (Ind-Saipan), John Paul Sablan (R-Saipan), Francis Taimanao (Ind-Saipan), Blas Jonathan Attao (Ind-Saipan), and House Speaker Ralph Dempan (R-Saipan). Rep. Anthony Benavente (Ind-Saipan), Roman Benavente (Ind-Saipan), Joseph Leepan Guerrero (R-Saipan), Ed Propst (Ind-Saipan), Vinnie Sablan (Ind-Saipan), Ramon Tebuteb (Ind-Saipan), Edwin Aldan (Ind-Tinian), and Ralph Yumul (Ind-Saipan) voted no.

Marcos W. Fong, CEO of Coca Cola Beverage Co. (Micronesia), Inc., in written comments yesterday, said the current $0.005 per fluid ounce tax on soft drinks already made it one of the heaviest taxed items in the CNMI, that the additional 4 cents tax would place an enormous burden on small business, and adds $11.52 of taxes to a case of soda.

The Coca-Cola chief said independent studies showed that taxes do not result in behavioral change. He urged "more proven solutions to our public health concerns."

Concerned citizen Glen Hunter urged a "no" vote on the bill and stressed, among other concerns, that he used to smoke, drink, and consume sugary drinks before, but the tax was "aggressive and abusive," would raise prices by 100 to 300 percent, and that people should not be "punished" but make "true and holistic" choice to live healthier. As owner of the restaurant The Shack Saipan, he said that a $138 syrup he purchases for coffee would jump to roughly $700.

Tan Holdings vice president Alex Sablan gave examples of all costs associated with applying the tax to certain type of beverage items, syrups, and powdered drinks. Sablan gave the example of a 72-ounce tub of Tang that sells about $8.99 today, but would sell at $37 after the tax is applied at 4 cents an ounce. Also a 5-gallon bag of syrup costs $68 gallons today and generates 3,074 ounces of beverage but would cost $226 due to the tax, he added.

"So it’s going to impact businesses," he told Saipan Tribune. "It’s going to impact it from the standpoint that they are going to have to pass it along….It’s not only to be passed along to the realm of the beverage itself but it’s going to be passed along to all the food items. And so the cost of doing business is going to rise, and the cost to purchase these goods is going to rise."

"…People are going to lose jobs, if a large portion of these taxes gets applied to wholesalers, distributors, restauranteurs, bars, because people are not going to consume these products at a greater degree than they are today because they are so excessively taxed," he added."

"You can choose today to pass the tax or don’t pass the tax," concerned citizen Tiberius Mocanu told lawmakers. You can hope that education happens at some point in the future by not passing this bill. But what’s sneakily there is that while we’re not educating anyone and while we’re not taking one step forward, Nestle, Coca- Cola, Nabisco, they are educating all of us. Every day.

"Who is educating our children right now?" Mocanu added. "Who is educating us right now? Those corporations. When we say we don’t want to be a nanny state, we don’t want to take choice away, we want to fund this bill and educate the Public School System, we are handing our responsibility to the community to those that have no responsibility to us. They have a responsibility to their shareholders. And they have a responsibility to their bottom line. That’s who you are yielding to in essence."

Patty Coleman, Nutrition and Health Program leader from Northern Marianas College-CREES, said that the Institute of Medicine, American Heart Association, American Diabetes Association, Mayo Clinic, the Harvard School of Public Heath, and several other organizations concerned with public health have recommended taxing SSBs as a means to reduce consumption.

"The sugar-sweetened beverage industry has done a good job of marketing their products in the CNMI and making us believe that we need to have sugar-sweetened beverages at parties and events and that we should consume their products daily," Coleman said. "They have had the lay of the land for decades at the cost of the health of the CNMI."

Public health planner of the Division of Public Health’s non-communicable disease bureau, Kaitlyn Neises, acknowledged that the tax could be seen as a "regressive" tax but only for unhealthy consumption of unnecessary and harmful products that don’t "deserve a place in our stores and dinner tables. "This tax becomes a progressive measure when healthier alternatives are chosen because we know that chronic conditions have an impoverishing effect in the long run," she said.

Marpac’s Ray Alvarez said he works for his company but to provide for his family, and at the end of the day, the net amount in his account is what he uses to pay for food and beverages.

"Four cents an ounce is extremely excessive to anyone who thinks about it," he said, saying that the community would be paying "taxes on taxes" with excise and gross sales taxes to go along with it.

Rep. Blas Jonathan Attao, who supported and voted for the bill, apologized for failing to address a "transition" or "grace" period as part of the bill that he feared without would lead to businesses jacking up prices to "test" the effects of sugar tax even before it’s put into effect after the 30-day window given if Gov. Ralph DLG Torres signed it into law. He suggested that perhaps the Senate could recall the bill and include this transition period into law.

Rep. Ed Propst stressed the soul-searching, research, and struggling the bill forced upon and acknowledge compelling arguments on both sides. He threw concern to the amount of empty sugar drinks that young peopled "downed" and that lawmakers eventually pick up at their cleanups and noted that $12 million a year was going to treatment for dialysis patients, adding that education was a good start but "we must do more."

However, Propst, who eventually voted against the bill, recalled advice he’d gotten when he first became a lawmaker to "do no harm" or more good than harm.

Rep. Antonio Sablan challenged health officials present for tangible results if the bill was passed, casting some doubt on how taxing sugar would affect the myriad of factors that play into disease in the Commonwealth. "I am the chair of the ways and means [committee], I should love this bill" for its projected $6 million in tax revenue, "but I just question…why 4 cents [tax?]. Why don’t we make it $5 an ounce and get it out of our community?" Sablan voted for the bill.

Rep. Ralph Yumul voted no the first time the bill passed the House and voted no again, saying that "with a family that has businesses, I know how it is to pass the cost to consumers" which they would not want to do after a disaster like Typhoon Soudelor.

Rep. Joseph Leepan Guerrero voted yes the first time the bill passed the House but voted no yesterday, citing, among others, concern that costs would be passed unto to public school lunches and doubts of any tangible health impacts. "It will never go away. Sodas …will remain here," he said.

Rep. Angel Demapan stressed that there was a "sunset" provision to the bill that would allow them to evaluate the success and merits of the funded health programs of the bill, and said that the government had made a commitment in years past to support the fight against non-communicable disease.

"We can always say its the wrong place and wrong time to start. What’s not debatable is that we have to start," he said. "If you want to access [sugary drinks], it comes with a price…Who pays for it? When population make unhealthy choices…we pay for it," he said, adding that at the young age of 33 he has already lost his parents to non-communicable diseases and would choose "people, over profit."

Dr. Don Hardt, optometrist at the Hardt Eye Clinic, brought a bag of "health" drinks to the microphone, unloading each one of them unto the podium. He said he had an experiment the day before picking up random drinks that looked healthy. "This is all junk," he said. "Our people don’t have the [training] I have" and "have no chance," he said, citing national health guidelines that say women need six tablespoons of sugar per day, men need nine per day, but that the sample drinks excessively surpassed this quota.

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