A new bill filed this week will affect the daily life of many Arkansans not by saving them money on soda, but by cutting funding to Medicaid. SB725 does two things. First, it reduces the overall tax on the syrup that makes soft drinks and second, it changes the way that syrup is taxed. Right now, soda syrup is taxed at $2 per gallon. Instead of taxing the syrup quantity, the new tax would charge 21 cents for each gallon of actual soda the syrup would make based on the recipe.[i] The average Arkansan is unlikely to benefit from a soda that is a few cents cheaper, but many Arkansans will be hurt by a decrease in Medicaid funding.

This bill would take money out of the Medicaid Trust Fund. Right now the soda tax directly benefits the Medicaid Trust fund as “special revenue”. This means that the funds from this tax can’t be used for other purposes, and they have been protected for over two decades. Reducing this tax means undercutting the largest source of funding for health benefits for low-income children and families.

A bill to reduce the tax on soft drinks would take money out of a budget that is already scraping by. The bill is expected to reduce general revenue by $4 million a year according to a recent article from Talk Business and Politics.[ii] This revenue loss will be compounded by an additional loss of federal matching funds.  Arkansas currently draws down about 70 cents for every dollar spent on Medicaid and the state picks up 30 cents. There is no plan in the bill to fill the hole this would put in the governor’s balanced budget.  Without a plan to make up for this loss, other programs could be in jeopardy including juvenile justice, child welfare, and education.

[i] If one gallon of syrup makes 5 gallons of soda, the syrup would be taxed at $1.05 per gallon (or 21 cents per gallon of finished soda).

[ii] https://talkbusiness.net/2015/03/sen-files-to-file-soft-drink-tax-cut/