Dec 17, 2009

IBWA: Lt. Gov. Cherry’s Proposed Bottled Water Tax Serious Threat to Michigan’s Economy, Citizens

Statistical analysis says per-container tax to cost Michigan more than 2,080 jobs

The $0.10 per container tax on bottled water proposed by Lt. Gov. John Cherry will cost Michigan more than 2,080 jobs, according to a new statistical analysis prepared for the International Bottled Water Assn. (IBWA) by John Dunham and Associates. A large number of these jobs would be in the bottled water manufacturing sector, plus many more jobs in supplier and ancillary industries.

Current U.S Bureau of Labor Statistics indicate that one out of five private sector jobs has disappeared in Michigan since 2000--a drop of 783,000 jobs. Nearly 25% of all private sector job losses in the U.S. have occurred in Michigan during this period, the highest rate of any state, IBWA said.

The vast majority of bottled water companies in Michigan and throughout the U.S. are truly small business--“mom and pop” family-owned companies of five to 10 employees with annual sales of $1 to $10 million. The severity of Cherry’s bottled water tax proposal could severely disadvantage most of these small Michigan-based companies against their out-of-state competitors, the analysis said.

It appears that Cherry’s bottled water tax proposals will focus only in-state groundwater withdrawals--raising the question as to why companies that are using Michigan municipal water sources for manufacturing food products, bottled water, sodas, beer and other beverages are treated differently.

Bottled water companies use extremely small amounts of groundwater, IBWA said. In fact, the Drinking Water Research Foundation reports that 0.02% of groundwater is withdrawn in the United States annually by bottled water companies.

“The bottled water industry has a long history in Michigan of working with the Executive Branch, the Legislature and others on sound and equitable laws and public policy, and we have often gone the extra mile in accepting additional industry-specific regulations as a show of good faith and desire to remain economically viable in Michigan,” said Joe Doss, president and CEO of IBWA. “IBWA’s active involvement in helping to support Senate Bill 857, which established criterion for permitting for large groundwater withdrawals (enacted in 2006) and helping to pass the Great Lakes Compact is proof of that.”

Cherry’s proposed tax on bottled water also attempts to circumvent the 35-year old Michigan prohibition on taxing the sale of food products, IBWA said. In 1974, the voters of Michigan approved an amendment to the state constitution that exempts food products from any sales or use tax. Bottled water is a food product regulated by the U.S. Food and Drug Administration and the state of Michigan.