Pursuing Snack Tax Repeal

April 16, 1995

With the legislature's failure to repeal the state 5 percent snack tax, chipmaker Frito-Lay Inc. says it will expand plants elsewhere and not at its Harford County facility. That could cost Maryland from 400 to 650 new jobs over the next several years.

But we believe there is still a chance to gain job expansion at Frito-Lay's operation in Aberdeen, if state and local officials get their act together now and make a firm pledge to the Pepsico subsidiary that they will aggressively push repeal next year.

This was a new legislature and a new governor, with different views of state finances and the budget; the power relationship was uncertain. Although freshman Gov. Parris Glendening strongly backed snack tax repeal, some legislators were clearly unwilling to eliminate a sure source of $15 million a year in state taxes on pretzels and chips.

Frito-Lay shares the blame for the measure's failure in the Senate budget committee, using the blunt threats and rewards that it has employed since 1992, when the tax law was passed. This year, it tried to draw a line in the sand based on Mr. Glendening's support. (It should be remembered, however, that Frito-Lay chose Aberdeen and began construction on the regional warehouse/bakery before the tax was suddenly imposed.)

The outcome showed the lack of clout that the new governor holds over the state legislature, especially in the Senate. Harford County Executive Eileen Rehrmann, a General Assembly veteran whose county programs prospered under the reign of former Gov. William Donald Schaefer, was unable to muster required legislator backing for her top request of the session. And Harford's four-term Sen. William Amoss, elevated to vice chairman of the Senate budget committee, proved decidedly ineffective in moving his colleagues.

The Frito-Lay expansion would provide a lot more jobs for Maryland and the state, with a strong economic ripple effect. It wasn't just a bill to benefit Harford County, but for the state's good, even if it meant giving up the tax revenue in hand.

The snackmaker will keep its Aberdeen plant running. A spiteful pullout would jeopardize Pepsi and Frito sales in Maryland. The snack tax, after all, doesn't add to its cost of making pretzels. Consumers pay it like other sales taxes; any negative impact on Maryland snack sales is unproven.

The tax is discriminatory, exempting cakes and crackers while hitting pretzels and chips. It was enacted as hasty budget action during the recession three years ago. As Governor Glendening noted, the symbolic importance to the business community of the tax repeal was as significant as the expected economic gains. There was good reason to crunch the snack tax. There still is.

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