Rhode Island Senate bill S2196 represents the next step forward in the “Shoot-Ourselves-In-The-Foot” style of Rhode Island politics. The bill – the ugly twin sister of H7832 on the House side – “creates a tax on sugary drinks for the purpose of reducing the demand for those beverages.”
Sponsored by RI Senate Democrats Donna Nesselbush, Elizabeth Crowley, Paul Jabour, and Joshua Miller – and Republican Thomas Paolino – an excise tax of one or two cents per ounce levied on beverages containing more than 5 grams of sugar will effectively shut down local small businesses that bottle and distribute soft drinks.
“This bill would place a tax of nearly $6 per case on my product,” said John Sgambato, president of Yacht Club Soda in North Providence. “And that is on the wholesale distribution side. Consumers will see an even higher price tag,” he said.
The bill cites a litany of random statistics and national figures as justification for exercising this government over-reach of authority, including the sponsors’ assertion that, “Taxes and subsidies on food can influence consumption and it is recommended that taxes should be implemented as part of a comprehensive strategy to prevent obesity.” Who recommends this action?
Mr. Sgambato noted that in other places where legislation like this has passed, companies saw a 30%+ drop in business. “That would close my doors,” he stated in frustration. Yacht Club Soda has operated its bottling plant on Mineral Spring Avenue for more than 100 years, since 1915.
Libertarian Party of Rhode Island Chairman Pat Ford said, “By what authority can the General Assembly exert such abusive over-reaching power and exercise economic violence to dissuade consumers from purchasing a legal product?” he asked.
“Despite a government’s self-asserted taxing authority, government has no legitimate authority to insert itself as a social mother, substituting its judgment for that of free citizens,” Mr. Ford said. “This is a blatant money grab to generate revenue for the state, under the pretense of concern for the public, ‘for the children.’” Worse, Mr. Ford said, it is a frontal attack on private local businesses that have endured decades of incremental meddling by the government.
Yacht Club Soda is not the only small business to suffer at the hands of misguided legislators. Other small companies include Empire Bottling Works in Bristol, Granny Squibb’s Organic Iced Tea in Providence, and Bootblack Brand Cocktail and Soda Syrups. Even Munroe Dairy, serving Rhode Island since 1881, could see its business suffer.
Mr. Ford challenges the House and Senate to produce studies and statistics that prove heavily taxing beverages actually reduces overall calorie intake and improves health outcomes. “While consumption of taxed beverages may go down initially, statistics from studies conducted all over the world indicate there is no significant evidence that sugar taxes cut body mass index (BMI), or rates of obesity, diabetes or heart disease,” he said.
Some European studies – in countries that have had a longer track record than United States – show consumers just switch to other caloric products, or, after a period of decreased soda consumption, resume use, resigning themselves to higher prices.
In Rhode Island, however, if small beverage companies close because of this unaffordable increase in conducting business, consumers will switch to the large beverage conglomerates, which can better afford to absorb a drop in business. Mr. Ford noted this scenario illustrates more abuse of power, with government favoring large business against its smaller competitors, and crushing the small business.
“It’s awful for anyone in this business, big or small,” Mr. Sgambato concurred.
And in the wake of another failed social engineering experiment, Rhode Island will be left with yet another decimated industry – the result of misguided “good intentions.”