Rhode Island small businesses have struggled to get through a historic economic downturn brought on by the coronavirus. We are just now getting to a point where we can see a light at the end of the tunnel. The last thing we need now are more burdens. Unfortunately, the state legislature is considering a new tax on beverages that will hurt working families, small businesses and their employees hardest.

There could not be a worse time to raise prices on families and increase costs to storeowners. Neighborhood grocery stores, corner stores and restaurants drive employment in our communities and fuel our local economies. Many have had to lay off employees or trim worker hours because of the restrictions that were necessary to combat the spread of the virus. Sales were down for many small business owners; some even had to close their doors.We should be relieving burdens on our small businesses and their customers, not adding to them.

We’ve heard about the harm that beverage taxes cause in other places. A tax of 1.5 cents an ounce doesn’t sound like much, but it adds up fast. Prices would go up as much as 60% or more on some beverages. It would add $2.40 to a typical 8-pack of sports drinks, and the price of a family two-liter soft drink bottle will increase by $1.02. Prices on fountain drinks would go up substantially.  

This is not a tax just on soda. The tax would affect sports drinks, juice drinks, ice teas, coffee drinks, lemonades, energy drinks, even kombuchas, flavored waters and fountain drinks. This tax could impact more than 4,200 workers and lead to a loss of at least $100 million in annual retail and restaurant sales.

The burden of the beverage tax falls most heavily on low-income and middle-income families living paycheck to paycheck, making it more difficult for people to afford their grocery bills. Rhode Islanders will do here what consumers have done elsewhere when this tax has been tried – they’ll cross the border for cheaper, untaxed beverages. And when they do that they’ll do all their grocery shopping in another state. That’s going to cut sales to Rhode Island stores and restaurants, especially those close to the border. That means job losses for Rhode Island workers.

This is exactly what happened in Philadelphia. A beverage tax of 1.5 cents per ounce on beverages was imposed on Philadelphians and they responded by shopping in the suburbs and New Jersey. Acme grocery stores saw beverage sales drop 47%; sales in Acme stores outside the city went up about the same amount. Total food purchases decreased in stores in the city and increased in the suburbs, according to Acme, meaning people were taking care of their entire grocery list outside the city.

That caused job losses. There were layoffs in the beverage industry, union truckers lost driving hours and workers in grocery stores saw their weekly hours cut. One grocery store serving a low-income neighborhood shut down entirely due to sales losses.
Businesses have suffered economically during the pandemic. A beverage tax will make it worse. There has to be a better way to address our needs in the state than with an unproductive tax that targets working people, our local small businesses and their employees.

Steven Arthurs is the President and CEO of the Rhode Island Food Dealers Association

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