Will a tax make you healthier? Rhode Island legislators will be wrestling with this question for the next several months.
Tuesday afternoon the Rhode Island House Finance Committee heard preliminary testimony from the Rhode Island Medical Society on bill H-7342, an act that if enacted would place a tax on all “sugar sweetened beverages.” The bill, proposed by state Representative Edith Ajello upon urging from the Rhode Island Medical Society, would tax all beverages with added sugar at the manufacturing level within the state of Rhode Island.
“Until we ourselves become healthier as a nation, health care costs will continue to rise,” said Steve DeToy, director of government and public affairs, Rhode Island Medical Society. “Until we start getting healthier patients, we can’t start reducing health care costs. The Rhode Island Medical Society supports anything we can do to reduce consumption of products with known associated health risks.”
DeToy specifically targeted sugar sweetened beverages as a leading cause of the American obesity epidemic, which is the “single largest cause of health problems,” according to the Rhode Island Medical Society.
Many within the beverage industry voiced their opposition to the proposed legislation, including the American Beverage Association, the Coca-Cola Company and PepsiCo.
“We feel that this bill unfairly targets the beverage industry,” said Coca Cola representative John Houlihan. “The Coca-Cola Company has been providing wide and ever expanding beverage services for over 100 years, constantly evolving to meet consumer needs. We are well aware of obesity problems, and have taken steps to combat them with our ‘think, drink, move’ campaign. However, the Rhode Island Medical Association is looking for some magic bullet fix for what is a more complex issue.”
“We are very concerned about soft drinks being singled out,” added Pepsi representative Tom Cardoza. “Moderation is the only solution. Taxation is not.”
If implemented, H-7342 would place a 1-cent per ounce tax on all beverages with added sugar. This amounts to a price increase of $1.28 per gallon on sugar sweetened beverages, and would generate an estimated $45 million in tax revenues. The medical association intends for the money to go toward constructing recreation centers and hiring health education teachers. However, according to DeToy, the distribution of the funds will be left up to the Finance Committee.
Bill supporters maintain that targeting the beverage industry is not the aim of the bill, despite its potentially negative effects on the industry.
“It’s not the industry, it’s the product,” said cardiologist and vice chairman of the American Heart Association Advocacy Committee Steven Fera, “and it’s a product identified as the leading cause of obesity. Yes, obesity is a complex issue, but we have to target the things that we can change. The beverage association has already removed sugar-sweetened beverages from many schools. We wish they would extend this wisdom to other areas.”
“Eighty percent of health issues are related to long-term chronic illnesses,” added Sylvia Weber of the Rhode Island State Nurses Association. “Obesity is a major contributor to this.”
The Pepsi Beverage Company employs more than 200 people at their manufacturing plant in Cranston. The corporation expressed serious concerns about the future of these employees were the bill to be enacted.
“Our employment level is completely dependent on our sales,” said Cardoza, “and this would have an impact.”
The projected effect of the bill is not well understood. Approximately 40 percent of all Coca Cola and Pepsi products are sugar free, and thus would not be subject to the tax. It is the position of H-7342 supporters that customers would simply choose these healthier options instead of potentially harmful sugar sweetened beverages.
“We simply want to make unhealthy choices a little more expensive,” said DeToy, before adding that the beverage industry giants like Coke and Pepsi own most of the healthier alternatives, and thus would not experience a drop in sales.
However, the actual effect of the bill on beverage sales is hard to project due to the unique nature of the proposed legislation.
“It’s difficult to predict what choices customers will make because this legislation doesn’t exist anywhere else,” said Caroline Murray of F/S Capitol Consulting LLC.
Similar taxes exist in both Arkansas and Virginia. However, the results of the tax have been unclear. Not only do both states have some of the highest obesity levels in the nation, but finance committee Representative Eileen Naughton pointed out that neither state’s beverage industry has suffered significantly negative effects since the taxes were introduced.
“People are not going to go thirsty,” said Fera. “They’ll make other choices.”
The bill also faced opposition from Rhode Island business owners, who believe it will negatively impact their sales and drive business out of state.
“With a struggling economy, this legislation just doesn’t make any sense,” said Steve Arthurs, CEO, Rhode Island Food Dealers Association. “This tax is significant enough that people are going to shop elsewhere. Food prices have risen by 4 percent in the last few years and this only compounds the issue. It places Rhode Island consumers at a disadvantage.”
“The Medical Society may say this isn’t a border issue but it is,” added Rhode Island Hospitality Association lobbyist Terry Martiesian. “A large amount of our population is based on a border with Massachusetts. This tax will give Massachusetts just one more leg up. People already go there for cheaper gasoline and cheaper liquor. They will do the same for beverages. Our consumers have had it up to here with taxes. I’d rather see them stay here.”
Arthurs particularly singled out lower income consumers as the groups that would be hardest hit by this tax.
“Middle and lower income families are hard-pressed during the current economic time to stretch their dollars and pay their grocery bills,” said Arthurs. “This would only add to the cost of that food basket.”
Bill backers argue that H-7342 will likely reduce costs for the average consumer by finally bringing down health care expenses. Rhode Island Community Catalyst estimates that adult Americans pay an average of $293 in medical expenses relating to obesity.
“We hear every day about health care costs,” said DeToy, “but until we start making healthier choices, they’re going to keep rising.”
Similar legislation has been on the floor of the finance committee for the past two years. None has been implemented as of yet. However, the H-7342 supporters continue to push for a tax on the grounds of public health.
“In the 2010-2011 school year, one in six children entering kindergarten were considered obese,” said Nicole Tambouret, director of the New England Alliance for Children’s Health. “Rhode Island has long been a health and wellness leader. This would be another step we could take to continue that tradition.”
“We taxed cigarettes and people stop smoking,” concluded DeToy. “This worked with cigarettes, it can work again.”