Owners of restaurants and businesses that sell beverages are furious about a new, 40 percent tax on syrup used to make soda and a doubling of taxes on beer and wine – passed by the Legislature last week in the waning hours of the session.

The taxes, owners say, will mean price hikes on some favorite beverages.

“I think it’s horrible,” said Beverly Soucy, operations manager at the Gorham Country Club Snack Bar.

The taxes, which go into effect on Aug. 1, were raised as part of a funding package for Gov. John Baldacci’s subsidized Dirigo Health insurance plan, and would bring in an estimated $35 million, according to an industry analysis.

That package also includes a 1.8 percent tax on claims paid by insurance companies and the self-insured, which essentially replaces a similar fee on paid claims known as the savings offset payment, already being collected by the state. It would raise another $36 million.

The tax package passed 18-17 in the Senate, straight down party lines. The vote in the House was 75-64, with 11 Democrats splitting from their party to vote against it.

What’s got people in the beverage industry angry is they didn’t see the tax hike coming and were never asked to weigh in on its effect on prices. Instead, it was slipped in as an amendment, without a public hearing, to replace a proposed 50 cent hike in the cigarette tax that didn’t have enough Democratic support in the Senate.

The syrup tax, which is new, is being highlighted as one of the most egregious. It is a $4 tax on a $10 gallon of syrup, and would cost an average McDonald’s $28,000 a year, industry experts say – a cost that eventually will be passed onto customers.

“It’s a 40 percent tax,” said Dick Grotton, head of the Maine Restaurant Association. “What are they thinking?”

“I felt like they snuck this in last minute to fund something that has nothing to do with beer, wine and soda syrup sales,”

said Tim Haines, owner of Sebago Brewing Co., which has locations in Gorham South Portland and Portland.

Haines said each of his restaurants go through about 10, 5-gallon boxes of soda syrup per week, a number that increases in the summer. He estimates the new tax on syrup will cost him some $200 week at each restaurant in syrup taxes alone.

“There’s a wall we’re going to hit where we can’t absorb the cost,” he said.

He anticipates increasing soda prices and not offering free refills.

“If we don’t hit our budget, we’re going to go out of business. We have to make tough decisions,” he said. “It seems the government doesn’t want to make the decisions to cut from spending.”

The syrup tax is in addition to a new tax of 42 cents per gallon on bottled soft drinks and a doubling of the taxes on beer and wine. Beer tax is going from 25 cents to 54 cents a gallon and wine from 30 cents to 65 cents a gallon.

“There’s so many other ways to do health care instead of taxing silly things,” Soucy said.

Peter Profenno, owner of Profenno’s Pub & Pizzaria in Westbrook, was outspoken in his opinion.

“All these increases are killing us,” he said. “I think they’re (legislators) totally crazy.”

Grotton and others in the business think legislators didn’t have a full understanding of the soda and syrup tax impact. Industry analysts say it will raise $27 million versus the $11 million to $12 million estimate in the fiscal analysis done on the bill.

“I don’t think the governor or the Legislature understands the enormity of the new taxes they passed Tuesday night,” agreed Newell Augur, the director of the Maine Beverage Association. He said a major and apparently unintended impact is that it covers more than what people think of as soda.

“The idea that this is a tax on just soda and syrup is a complete misnomer. It’s a tax on everything but plain water and 100 percent juice,” Augur said, including bottled teas and flavored water.

“When you create changes in public policy in the dead of night without any public input, these are the kinds of problems you have,” Augur said.

Since the bill was passed, Augur and Grotton have become part of a coalition looking at options that include a people’s veto of the new tax, which Baldacci signed into law the day after it was passed.

Grotton said the petition veto, if one is initiated, would not be aimed at the Dirigo Health program, but rather the tax passed to pay for it.

Dirigo offers a subsidized insurance plan, which currently covers 13,681 people. Part of its funding also goes to pay Maine’s share of enrolling 5,650 parents in a special state Medicaid program that exceeds standard federal income guidelines. Dirigo was due to run out of cash by February 2009 without new funding.

On Monday, Grotton was sending out a survey to his member restaurants asking whether they would be willing to support a veto effort. Augur said he is hearing from a lot of angry people.

“We have heard literally from thousands of Maine citizens and Maine businesses, who are as astonished by this new tax as we are,” he said. “We’re looking at all of the options, and a people’s veto is certainly one of them.”

The organizers would have to apply to the Maine Office of Secretary of State for approval of their referendum petition and then would have 90 days to gather the needed 55,087 signatures to put the veto on a statewide ballot.

Reporters Kate Power and Michael Hartwell also contributed to this story.


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