More than $6.8M from sugar tax expected

In their findings on proposed a sugar tax bill last week, the Senate largely cited the harm of a sugar-laden diet on CNMI residents but also note the millions of dollars in additional government revenue potentially collected and given to local health programs to combat diabetes, among other programs like medical referral.

The Senate passed House Bill 19-99 HD4, SD1 unanimously last week with substantial amendments. The bill seeks to, among others, assess a health impact tax on sugar-sweetened beverages and sugar-sweetened concentrate, for the prevention of non-communicable diseases in the CNMI.

In their report recommending the passage of the bill, the Senate Committee on Health and Welfare noted that the current tax of $.005 per fluid ounce on soft drinks alone generated approximately $849,4000 in 2015.

With the additional proposed tax of $.04 per fluid ounce, senators wrote, “approximately $6.8 million will be collected from soft drinks alone.”

“This means that this estimate will be far exceeded when the taxes are collected for other sugar-sweetened beverages, and in addition, the $.04 per fluid ounce on the syrup and powder foodstuff,” the senators said.

Among others, the Senate amended the bill to provide funding for the Divisions of Customs, CNMI Medical Referral Programs, Public School System health and education and drug-free programs, and the general fund, after striking out a provision that would have given 50 percent of revenues collected to the local hospital to essentially pay off its debts and afterwards its operations.

The Senate broke down the taxes collected as follows: 60 percent of the taxes collected to the diabetes maintenance programs and the community health grants under the hospital, 10 percent to Customs to support enforcement, 10 percent for the CNMI Medical Referral program, 10 percent for PSS health education and drug-free programs, and 10 percent to the general fund.

This breakdown removed the 50 percent allocation to the Commonwealth Healthcare Corp. to pay its debts to the Marianas Public Land Trust.

A sunset provision was also added so that “impact” of the funds must be reviewed after five years, to see whether the allocations should continue or should directed to other programs.

The Senate also mandated that the earmarks cannot be reprogrammed and that any person who violated this provision would personally liable for the amount reprogrammed.

They further added a provision so that the taxes collected are accounted and deposited in the respective accounts every quarter, out of fears that the funds many not get to recipient in fixed and consistent intervals.

Senators explained funding to Customs by saying they met the Customs director to discuss the bill and note that with the proposed tax, “each box of syrup and powder food stuff must be opened so that the size in fluid ounces can be determined to calculate the appropriate excise tax for the syrup and powders.” The current tax on syrup and powder food is one percent ad valorem and is easily calculated by just taking one percent of the invoice value of the food stuff, the Senate said, but the new procedure would “lengthen the already long and tedious inspections and clearance process.”

Citing studies conducted in the CNMI and the U.S., the Senate also said that obesity rates in the NMI are 50 percent higher than the entire U.S., which is at a rate of 34.9 percent. Moreover, that official Medicare numbers indicate a rate of dialysis from diabetes in the CNMI at 300 percent above the U.S. level.

The Senate committee also said that theoretical models have also shown that increased sugar-sweetened beverage taxes result in reduced consumption, leading to weight loss and reduced risk of disease.