New tax legislation could make buying sugary soft drinks costlier in Rhode Island, and it’s stirring up a debate over the measure’s potential positive effects on health and negative effects on the economy.
Matching bills in the House and Senate call for a 1.5-cent-per-ounce tax on bottled and canned sugary drinks such as soda, sports drinks, energy drinks, and sweetened teas and coffees.
Supporters of the legislation, including the Rhode Island Public Health Institute, Rhode Island Medical Society and the American Heart Association, say sugary beverages add to the state’s obesity problem, particularly among children, and part of the tax revenue would be used to give Supplemental Nutrition Assistance Program recipients a 50% reduction on the cost of fruits and vegetables.
But local food and beverage industry groups argue that the tax will hurt consumers who are already struggling during the COVID-19 pandemic, and it may push some to cross into Massachusetts to do their food shopping, damaging Rhode Island retailers.
While several U.S. cities have enacted taxes on sugary drinks, no state has passed such a measure. In Rhode Island, similar legislative efforts have failed in the past.
Rep. David Morales, D-Providence, a co-sponsor for the legislation, hopes it will be different this time.
“The main motivation with this legislation is to create a sustainable revenue stream focused on government-sponsored programs that promote public health,” Morales said.
“[The] pandemic exacerbated issues that already existed,” he said. “We saw a lot of food insecurity and it became evident it was disproportionately affecting communities of color, working people and low-income people.”
The legislation calls for the tax to be assessed on beverage distributors, which would then likely be passed to retailers and consumers. Drinks that are made by companies with an annual income of less than $2 million would be exempt.
Sen. Valerie J. Lawson, D-East Providence, the primary sponsor of the Senate bill, said it’s estimated the tax would generate $40 million annually, with about $25 million going to SNAP and $15 million going to the state’s general fund.
Amy Nunn, executive director of Rhode Island Public Health Institute and Brown University professor, said the proposed tax is a “market-based solution for changing behavior.” She said businesses that are taxed would likely pivot and sell alternative products.
The food and beverage industry sees it another way.
The Rhode Island Food Dealers Association called the tax “regressive,” saying it believes the tax would add $2.40 to the cost of an eight-pack of sports drinks and $1.02 to the price of a 2-liter bottle of soda.
“This is a really bad time to do this,” said Sarah Kennedy, Rhode Island Beverage Association spokesperson. “Many businesses have had to lay off employees, reduce hours or close their doors because of the [pandemic] restrictions.”
Kennedy said a study found a similar tax in Philadelphia caused 1,200 people to lose their jobs.
“The impact on small businesses and grocery stores was seen immediately as consumers crossed the city line to shop for more-affordable goods,” she said.
Sue Budlong, spokeswoman for Rhode Island-based Dave’s Fresh Marketplace Inc., said the tax could hamper the company in a competitive industry. “We have 10 locations. Our competition has thousands. We’re competing against some big, big, heavy hitters in the state,” she said.
Budlong said education, not a tax, is needed. “Dave’s is all about healthy,” she said. “We want that for the state. There has got to be better ways than just continuing to tax people for these gaps in education.”
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.
