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Testimony

Testimony of:
Susan Hawkes
GMA Legislative Counsel
Grocery Manufacturers Association
Maine Joint Standing Committee on Taxation

March 22, 2000

Testimony of Susan Hawkes, GMA Legislative Counsel, and Treasurer, Don't Tax Food Food Coalition of Maine, on LD 2602, To Repeal the Sales Tax on Snack Food Except Candy and Confections

Senator Ruhlin, Representative Gagnon and members of the Taxation Committee, my name is Susan Hawkes. I am testifying in support of L.D. 2602 as a resident of Sidney, Maine, as Treasurer of the Don't Tax Food Coalition of Maine, and as legislative counsel for the Grocery Manufacturers of America.

The Don't Tax Food Coalition of Maine was formed in the fall of 1999 to support citizen initiated legislation to repeal Maine's tax on snack food. The Coalition's members include the Maine Grocers Association, the Maine Potato Board, the Wild Blueberry Commission of Maine, Houlton Farms Dairy, J.J.Nissen Bakery, the New England Convenience Store Association, the Grocery Manufacturers of America, the Snack Food Association, and the American Bakers Association. The Coalition has raised money through its membership to fund the petition drive and to organize the campaign.

The Grocery Manufacturers of America (GMA) is a national trade association whose member companies are familiar names to Maine consumers. In addition to distributing and selling their food products throughout this state, many of these companies purchase significant amounts of Maine grown produce - such as potatoes, blueberries, cranberries and apples - to use in their products. GMA supports a fair, competitive marketplace for all grocery and food products and has actively supported legislation introduced in 1993, 1995, 1997 and 1999 to repeal Maine's selective tax on food. On March 1, 2000, Secretary of State Dan Gwadosky found that 48,597 valid signatures from Maine registered voters had been properly filed on the initiative petitions calling for repeal of the snack tax, more than the minimum 42,101 signatures necessary to place the issue before the Maine Legislature this session on an initiated bill.

If passed, L.D. 2602 would eliminate the sale's tax on food items that were not taxed prior to the enactment of the snack tax in 1991. Items such as chewing gum, candy, and soft drinks would remain taxed. Should the Legislature fail to enact L.D. 2602, or should they amend it, the following question will go to the voters on the November ballot: "Do you want to repeal the tax on snack food except candy and confections?".

The snack tax is the last remaining tax "gimmick" from 1991.

In 1991, to avoid a serious fiscal crisis, the Maine Legislature was forced to include a number of unpopular "quick fix" revenue enhancements in the budget package. These included increasing the sales tax to 6% and extending it to include a wide variety of food products characterized as "snacks". Although many legislators at the time of enactment acknowledged that the snack tax was bad fiscal policy, it was generally understood that the tax would be a temporary measure and would be repealed when the State no longer faced a budget deficit. The other taxing measures enacted in 1991 have since been repealed. These included the hospital tax, the nursing home tax and the increase in the sales tax.

Maine is only state with a selective food tax.

During the early part of the 1990's, many states experienced budget crises that forced legislators and administrators to search for new revenue sources. Temporary budget measures and selective food taxing became a means of last resort. To date, all jurisdictions in the country have repealed the snack tax except Maine and the District of Columbia which is expected to repeal its snack tax this Spring.

The snack tax is a tax on groceries.

While its name implies that only individual servings of snack food items are taxed, the truth is that this tax includes basic grocery staples such as saltine crackers, pilot crackers, bread sticks, ice cream, frozen yogurt, muffins, pies, cookies, cakes, doughnuts, jello, puddings, popcorn, hot cocoa mix, croissants, dessert breads, marshmallows, marshmallow fluff, breakfast bars, toaster pastries and roasted nuts. And not just individual servings are taxed, but entire baked pies and half gallons of ice cream.

The snack tax is discriminatory and unfair.

Any tax on food is regressive and unfair because it places a disproportionate burden on lower-income households who can least afford to pay the tax. One third of all Maine households earn less than $20,000 annually and spend 21% of this income on food. By comparison, households which earn $50,000 annually spend approximately 7% of their income on food. Repealing the snack tax will provide a substantial benefit to Maine's elderly who may be on a fixed income and persons struggling to support a family on a low income.

The snack tax is a hidden tax.

Most Maine citizens don't realize that they are actually paying a 5.5% sales tax on many foods they buy at the grocery store to serve at home. This is due in part to the fact that consumers have no way of knowing which foods are taxed until after paying for them at the check-out counter. Very few people look closely at their grocery receipts or even understand the code on the receipt which indicates which item is taxed.

The snack tax is confusing.

Both retailers and consumers find the tax confusing. For example, a baked apple pie is taxed, a frozen apple pie is not taxed; blueberry muffins are taxed, English muffins are not taxed; dips are taxed, salsa is not taxed; saltine crackers are taxed, cocktail bread is not taxed; roasted nuts are taxed, unroasted nuts are not taxed. It is impossible to rationalize or find any logic in the snack food tax.

Maine people have a reputation for being honest and straightforward. They deserve no less from their government. With a healthy economy and a state budget surplus in excess of $300 million, it is time that the Legislature does the right thing for the people of the State of Maine and repeals this unfair and confusing tax.

I appreciate the opportunity to address the Committee on this important issue. I urge you to vote "Ought to Pass" on L.D. 2602.

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