[Guest post by DRJ]
More and more states like Colorado are considering whether to tax sweets and sodas to balance precarious state budgets:
“[Colorado Governor Bill] Ritter’s office estimates that eliminating the sales-tax exemption for candy and soft drinks would generate $17.9 million and help avoid deeper cuts to schools and colleges.
“We thought that people would be willing to pay 3 cents on a dollar candy bar,” said Ritter, who once spent three years running a nutrition center in Zambia before resuming his law career. “We just viewed it (allowing the sales tax) as something that doesn’t do anything to our (state’s) competitiveness.”
Illinois recently subjected candy and soft drinks to sales tax, San Francisco is considering a soda tax, and candy and soda tax proposals have been floated this year in Massachusetts and Pennsylvania. Even President Barack Obama said recently he was interested in the idea of taxing soda, saying kids were drinking too much of it.”
Supporters say taxes will help balance local budgets and make people healthier. Critics say taxes like this impact poor and middle-class Americans the hardest. Either way, states face difficult decisions as budget deficits are expected to increase in FY 2010:
“In total, states faced a budget shortfall of $113.2 billion in FY 2009. As high as that shortfall is, it is far less than some projections for the shortfall for FY 2010. According to one projection, states could, in total, face a shortfall of $142.6 billion in FY 2010.
It is worth noting that these shortfalls would be even higher if it were not for reception of federal funds. The reception of federal funds through the American Recovery and Reinvestment Act (ARRA) was used by states to fund some of their expenditures, lowering the reported spending that comes out of the general state fund.”
FY 2009 budget deficits for each state are listed here; projected state FY 2010 deficits are here; and stimulus funds distributed by state are shown here. Some states have no projected shortfall — good news for them — but bad news for the remaining states that make up the increasing difference.