TAX NEWS - June 2010

Maryland Tax: Tax beverages, not Baltimore factory energy!

It's mind-blowing that City Council is talking about taxing the energy used by Baltimore's dwindling base of manufacturers as an alternative to the "bottle tax" of 4 cents a drink. Baltimore had 13,000 factory jobs in April -- the least ever recorded since the Labor Department began keeping track. That's down from 27,000 in 2000 and 43,000 in 1990.

These jobs typically come with decent pay, health plans and other benefits. Baltimore needs to do whatever it can to support manufacturing. It already does little enough. Factories are intensive users of electricity, which is already costly enough in Maryland. Taxing it at 8 percent would cost even small shops thousands. Maryland Thermoform's Scott Macdonald figures his 8 percent energy tax would be $28,000 a year.

Forcing an expensive energy tax on Baltimore manufacturers is a great way to ensure that the city's number of factory jobs keeps heading toward zero. That'll hurt the city's budget a lot more than the tax might help it temporarily.

Meanwhile there is a good discussion of beverage and soda-pop taxes by Harvard's Greg Mankiw here and NYT's David Leonhardt here. Tax the soda, says Leonhardt:

A soda tax obviously would not solve the obesity epidemic. But it appears to be one of the most promising responses, given the central role that sugary drinks play in the epidemic and the fact that they have no nutritional benefit. A tax would also help reverse the big decline in the price of soda over the last few decades, at the same that the price of fruit and vegetables has been rising. Finally, as with a gasoline tax, a soda tax would help cover the broader costs that the product imposes on taxpayers.