Breaking the Snack Tax Habit

April 07, 1995

The state's 5 percent snack tax was born of fiscal desperation three years ago, and has since become a reliable revenue producer of nearly $15 million a year. With snack sales little affected by the tax, or by changes in economic conditions, the impost is a hard one for legislators to give up.

Consumers and merchants don't seem overly vexed by the tax, which is levied on such "salty" snacks as pretzels and chips, but not on baked snacks such as cupcakes.

The main opponent is Frito-Lay Inc. and Harford County, where that snackmaker has a factory-warehouse employing 150 people. If the snack tax is repealed, Frito-Lay says the work force could quadruple within a few years as the facility expands. But no repeal, no expansion, the Pepsico subsidiary insists.

This kind of heavy-handed attitude did not sit well with the Senate Budget and Taxation Committee, which rescinded its earlier approval of repeal and is holding the legislation as the General Assembly prepares to go home Monday.

Gov. Parris Glendening and House legislative leaders support the snack tax repeal as a pro-business measure that would spur job expansion in Harford County while encouraging other businesses to view Maryland in a more positive light as a place to locate.

Over the long run, a phase-out of the snack tax would serve those interests without upsetting the state budget. There are more equitable ways to collect this money, without favoring one kind of snack over another.

At the same time, the nation's largest snackmaker can be expected to make hard business decisions about expansion and production at the Aberdeen plant regardless of whether the tax disappears. Any intemperate, spiteful reaction by Frito-Lay will only redound to its detriment in this highly competitive business. Pepsico isn't likely to create capacity, here or anywhere else, that cannot be effectively, economically used.

Legislators are prudent in seeking firm commitments from the food company on its future plans before repealing the tax. Harford and Aberdeen have already made economic concessions to help the employer start up local operations at the $20 million plant.

Time is short. Senators ought to act this session to repeal the snack tax (which won't affect the fiscal 1996 budget) -- but only if Frito-Lay makes a corresponding pledge to its future in Maryland.

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