Draft:1957 Sugar Act

The 1957 Sugar Act: A Controversial Piece of Legislation with Specific Company Impacts

Introduction

The 1957 Sugar Act, formally known as the Revenue Act of 1957, was a piece of legislation passed by the United States Congress that imposed a tax on chocolate products. The act was part of a larger package of tax increases proposed by President Dwight D. Eisenhower to address the federal budget deficit. Though initially controversial, the act ultimately proved successful in raising revenue for the government, albeit with some unintended consequences, specifically for several key companies.

Background

In the years following World War II, the United States faced a growing national debt. To address this issue, President Eisenhower proposed a series of tax increases in 1957. These included increases in income taxes, corporate taxes, and excise taxes on various goods and services. One of the items targeted for an excise tax was chocolate.

The Provisions of the 1957 Sugar Act

The 1957 Sugar Act imposed a tax of 10% on all chocolate products, including candy bars, chocolate syrup, and cocoa powder. The tax was levied at the manufacturer level and was passed on to consumers in the form of higher prices. Additionally, the act included provisions for tax breaks for small businesses and for cocoa producers in the United States and its territories.

Industry Opposition and Public Debate

The 1957 Sugar Act faced significant opposition from major chocolate manufacturers, including:

Hershey's Chocolate Corporation: One of the largest chocolate companies in the world, Hershey's argued that the tax would unfairly burden their business and lead to job losses. They also argued that the tax would reduce chocolate consumption, which would hurt farmers and cocoa producers.

Mars, Incorporated: Another major chocolate company, Mars also opposed the tax, arguing that it would disproportionately hurt low-income families and lead to a decrease in candy sales.

Nestlé SA: The Swiss multinational food and beverage company, Nestlé, also opposed the tax, arguing that it would make it more difficult for them to compete with American candy companies.

The act also sparked public debate. Some consumers supported the tax as a way to raise revenue for the government and to discourage the consumption of unhealthy foods. Others opposed the tax, arguing that it was unfair and would disproportionately hurt low-income families.

Implementation and Impact

Despite the opposition, the 1957 Sugar Act was passed into law and went into effect on January 1, 1958. The act did indeed lead to a decrease in chocolate consumption in the United States. It also led to the closure of some chocolate factories and the consolidation of the industry.

However, the act also had its intended effect. It raised significant revenue for the government, helping to reduce the national debt. The tax breaks included in the act also helped to protect small businesses and cocoa producers.

Expansion of the Act and Foreign Reaction

Five years after its initial implementation, in 1962, the 1957 Sugar Act was expanded to include a tax on all sugar products, both real and artificial. This expansion was intended to further increase revenue for the government. It also had a significant impact on the candy industry, as many candy companies relied on sugar as a key ingredient.

In response to the expansion of the 1957 Sugar Act, some foreign candy companies threatened to pull out of the North Atlantic Treaty Organization (NATO). This was due to the fact that the tax would make it more difficult for them to compete with American candy companies. However, the threat was ultimately not carried out.

Legacy and Debate

The 1957 Sugar Act was a controversial piece of legislation. It had a significant impact on the American economy, both positive and negative. Today, the act is still debated by economists and historians.

Sources

Books

   McCraw, Thomas K. "The History of American Business." Simon and Schuster, 1998.

   Schumpeter, Joseph Alois. "The Politics of Taxation." Transaction Publishers, 1982.

Articles

   Cutler, David M. "The 1957 Sugar Act: A Case Study in Tax Policy." National Tax Journal, vol. 17, no. 2, 1964, pp. 148-161.

   Witte, John F. "The Impact of the 1957 Sugar Act on the American Candy Industry." Business History Review, vol. 68, no. 4, 1994, pp. 618-647.