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

International Bottled Water Association | IMMEDIATE RELEASE | December 16, 2009

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

ALEXANDRIA, VA – The 10-cent per container tax on bottled water proposed by Lt. Governor John Cherry will cost Michigan more than 2,080 jobs, according to a new statistical analysis prepared for the International Bottled Water Association (IBWA) by John Dunham and Associates (New York). 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 (-19.6%). 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. Michigan has consistently led the nation in yearly job losses during Governor Granholm’s Administration.

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 5-10 employees with annual sales of $1-10 million. These are local entrepreneurs with deep roots and strong ties within their community. The severity of Lt. Governor Cherry’s bottled water tax proposal could severely disadvantage most of these small Michigan-based companies against their out-of-state competitors.

It appears that the Lt. Governor’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. In fact, the Drinking Water Research Foundation reports that a mere 0.02% of groundwater is withdrawn in the United States annually by bottled water companies. Lt. Governor Cherry also seeks to strip property rights from Michigan businesses, which is contrary to already settled law and long-standing precedent.

“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,” he continued.

Lt. Governor John Cherry’s proposed tax on bottled water also attempts to circumvent the 35-year old Michigan prohibition on taxing the sale of food products. In1974, the voters of Michigan approved an amendment to the State constitution that exempts food products from any sales or use tax (Mich. Const. of 1963, art. IX §8). Bottled water is a food product regulated by the U.S. Food and Drug Administration and the state of Michigan. Therefore, on top of posing serious damage to Michigan’s economy, Lt. Governor Cherry’s proposed tax would be unconstitutional.

The new tax as proposed would raise the cost to consumers for a 24-pack case of bottled water by $2.40. That price hike would place an additional financial burden on struggling Michiganders who purchase bottled water to help them stay hydrated and refreshed. Bottled water is a safe, healthy, convenient product that does not contain sugar, caffeine and other additives that they may be trying to moderate or avoid. Higher bottled water prices may also cause some Michigan consumers to purchase their bottled water from neighboring states.

Michigan bottled water businesses are already strained in the current economic crisis – a tax on their products will only add further strain. Furthermore, the bottled water industry has a long history in Michigan of coming to the aid of those in distress during incidents when bad weather, floods, fires and other events have prevented municipal water systems from providing clean, safe drinking water. For bottled water to be available in emergency situations, there must also be a viable commercial marketplace that supports its production. Reducing the commercial viability of bottled water could seriously threaten its availability during emergency situations in Michigan.

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The International Bottled Water Association (IBWA) is the authoritative source of information about all types of bottled waters, including spring, mineral, purified, artesian, and sparkling. Founded in 1958, IBWA’s membership includes U.S. and international bottlers, distributors and suppliers. IBWA is committed to working with the U.S. Food and Drug Administration (FDA), which regulates bottled water as a packaged food product, to set comprehensive and stringent standards for safe, high-quality bottled water products.  

In addition to FDA regulations, IBWA member bottlers must adhere to the IBWA Bottled Water Code of Practice, which mandates additional standards and practices that in some cases are more stringent than federal and state regulations. A key feature of the IBWA Bottled Water Code of Practice is a mandatory annual plant inspection by an independent, third-party organization.  

IBWA is proud to be a partner with Keep America Beautiful and a supporter of Drink Up, an initiative of former First Lady Michelle Obama and the Partnership for a Healthier America (PHA), which encourages Americans to drink more water more often – whether from the tap, a filter, or in a bottle. Choosing water is always the healthy choice.