On June 26, the controversial climate change bill narrowly passed in the House by a vote of 219-212. Eight Republicans voted for it; 44 Democrats voted against. Constituents are beginning to attack freshman Democrats who voted for the bill.
The speed and complexity of the legislation (1,300 pages) has left most American businesses, including agriculture, scratching their heads as they try to quantify the added cost to their respective industries. The House bill’s ag title leaves so many details to be defined and worked out by the Secretary of Agriculture that a precise analysis of the impact on a specific industry is virtually impossible.
Once again, House Agriculture Committee Chairman Collin Peterson should be applauded for standing strong in the face of intense pressure from House Leadership and for playing pivotal role in improving the bill for agriculture. However, very deep concerns by several farm groups forced them to oppose the legislation.
The general view is that increased costs for inputs will far outweigh any benefits from selling carbon credits in the market.
The Senate, as usual, is more cautious about proceeding on this issue. Congressional committee deadlines are already being pushed back to assess the constituent backlash of the House vote and move on to health care reform. A real concern for senators is the fear that strong restrictions on various industries will be the tipping point for companies to shut down U.S. production of various products to move oversees to China or India that will have lower standards and enforcement problems.
A slowdown in the Senate may also allow industries to show the economic implications of the House-passed bill and seek modifications in the Senate.
With a global climate change summit in Copenhagen, Denmark in early December, the Administration wants to show that the U.S. is serious about addressing this issue—even if legislation is not yet complete.
A second priority for the Obama Administration is to provide health care coverage for uninsured Americans.
As you have seen in the press, this initially carried a trillion dollar price tag, which required proponents to find ways to reduce the cost and find new revenue sources. One item that was discussed at length was to put a tax of 3 cents per 12-oz can of all sweetened beverages—soft drinks, juices, teas, sweetened milk, etc. Basically, everything but water and diet beverages. This would raise an estimated $50 billion over 10 years.
While the immediate impact could be felt by the soft drink bottlers and the producers of high fructose corn syrup, the tax is against a sweetener, which we strongly oppose. If such a tax is established, it will be viewed as a revenue source by policymakers and targeted for increases over time, and likely expanded to other industries, such as the confectionary and snack industries.
If you are going to tax soda, what about taxing products with high fat or salt content? Dictating America’s diet through taxation is clearly not a path that should be taken.
The 3-cents-per-can tax should also be put in its proper perspective. A 12-ounce soft drink contains 39 grams of sugar. This equates to a 35 cent per pound tax on the usage of HFCS or sugar in a soft drink. The tax would exceed the cost of the sweetener itself.
The sweetener cost per can of soda at different wholesale sweetener prices:
Sweetener wholesale price
Sweetener cost per 12-oz can or bottle
15 cts/lb 1.29 cents
20 cts/lb 1.78 cents
25 cts/lb 2.15 cents
30 cts/lb 2.58 cents
35 cts/lb 3.01 cents
The House Ways and Means Committee had considered—but did not include—the tax in it’s list of revenue raisers to offset the costs of health care reform. We are hopeful that the Senate Finance Committee also rejects putting more taxes on food.