Sunday, December 13, 2009

But Will This Tax Apply to Tea?

Michigan's Lt. Governor, John Cherry, is floating an idea for a 10 cent tax on bottled water in order to fund the "Promise Scholarships" that were recently cut out of the state's budget.

The details of his plan are still developing, but so far it sounds like the tax will only apply to companies that manufacture bottled water in Michigan. The tax will apply to water sold in Michigan or shipped out of the state. Lt. Governor Cherry estimates this new tax will raise $118 million, of which $100 million will be used for the scholarships and $18 million will be used for wetlands regulations and other conservation plans.

I think this plan will be pronounced dead on arrival. 

First of all, how fair is it just to tax companies that use Michigan's water for producing bottled water?  If "It's time for the big bottlers to pay their water bill", as Cherry says, shouldn't all beverage companies that use Michigan's water have to pay the tax?  What about beer producers and soft drink bottlers?

What about tea?  Should it then also apply to bottled tea?  If I remember correctly a tax on tea eventually led to a thing called the American Revolution.

According to my research, the tax on Michigan state tax on beer is only about 2 cents per bottle.  Can anyone really justify that bottled water should be taxed at a higher rate than beer?  I'm not necessarily advocating for raising the beer tax, I'm just referring to the beer tax to illustrate a point.

Besides, the Michigan Promise Scholarship is the program that replaced the Michigan Merit Award.  The Michigan Merit award was originally funded with 75 percent of the proceeds from the state's tobacco settlement.  What became of that money?

Just for the record, I was against using the tobacco settlement money for that purpose originally.  The lawsuit was filed against the tobacco companies under the guise that their product was costing the state in terms of health care benefits.  But did Michigan then use the majority of that settlement money for health care and smoking cessation programs?  No, they used most of it for college awards.

In addition, considering all of the cuts being made to the funding of K-12 schools and other important programs in Michigan, should creating a new tax just for the Promise Scholarship be the top priority?   I realize it's called the "Promise" Scholarship, but there are many other "promises" that were implied in past state budgets that are now being cut.

Again, as I mentioned in this blog a week ago, it is time for Michigan  to consider some major tax reforms. To continue to nickle and dime its citizens with piecemeal tax ideas that don't address the root cause of the state's financial problems is legislative malpractice.