The late U.S. Senator Russell Long was a keen observer of how our elected officials go about deciding the intricacies of tax policy. During his long tenure as chairman of the Senate Finance Committee (1966-1981) he was especially resourceful at deciding whom to tax. Actually, his recipe for creating taxes was quite simple. He put it this way, “Don’t tax you. Don’t tax me. Tax that fellow behind the tree.”
There is a lesson in that maxim for every business in the pet industry. It doesn’t take much for enterprising politicians to conclude that the pet industry is that fellow behind the tree. The pet industry, which represents a marketplace of over $50 billion, could find itself an easy target for special taxes. It is an industry that generates lots of revenues but is not known as a lobbying powerhouse or as a major political contributor. Elected officials like to pick on easy marks that they expect will not fight back.
It takes revenue to fund government at federal, state and local levels. We all know Uncle Sam finds himself in serious debt, and his cousins in the state and local governments are struggling to make ends meet. Once the government has taxed individuals and business to the fullest extent possible, enterprising elected officials seek new avenues for revenue. Usually, these new revenue sources are products or services that the public has a proclivity to purchase in volume. Anything that sells tends to be fair game for a special tax levy. Pet products, and even pets themselves, are not immune from this taxing trend.
In fact, we are already witnessing the first wave of this new tax grab. Some state legislators are introducing special tax measures aimed at dog food sales to pay for spay and neuter programs. Other states are contemplating taxes or new fees on the sale of pets. Still others want to increase fees on breeders. All of these special taxes are on top of sales taxes. The easy way that legislators gain support for these tax initiatives is to earmark the new revenue for a “worthy cause.” Another tactic that legislators employ is hiding these taxes from consumers by making the manufacturer or the distributor pay the tab, so consumers don’t see the tax. Although costs of these hidden taxes or new fees get passed on to consumers, they often do not realize what happened until it is too late.
Most businesses do not believe they will ever fall victim to this taxing tactic. A little history lesson says otherwise. First, it happened to the so-called sin products—alcohol and tobacco. Now, soft drinks have been added to this taxing mix. Almost any product could be next in line, including pets and pet products. And once a tax makes it way on the books it tends to stay, and over time it tends to increase.
Maryland and Washington state are pioneering special tax initiatives in their states, making the initial distributor or “responsible buyer” of large volumes of pet food pay a spay/neuter fee. States are also coupling so-called inspection fees for pet food and specialty pet food along with spay/neuter fees. Expect to see even more efforts along these lines in the near future.
Groomers and breeders are in the crosshairs too. Expect the purpose for these special taxes or fees to vary, depending on where there is a funding shortfall for any government program that is animal related.
Senator Long made another observation that speaks to the pet industry’s predicament when it comes to special taxes.He said, “Democracy is like a raft. It won’t sink, but you will always have your feet wet.” Given the accelerated special tax trend we are witnessing, the pet industry will have wet feet for some time to come as it fends off these unwarranted special tax challenges. If the pet industry is to succeed in stopping these taxes, an industry-wide commitment will be needed to persuade politicians that their insatiable appetite for special taxes should not include pets or pet products.
Charlie Sewell is executive vice president, external affairs, for the Pet Industry Joint Advisory Council (PIJAC). For more information about PIJAC, visit pijac.org.