The idea that people will cross state lines to avoid paying taxes is one of the most abused axioms in Rhode Island politics, but this notion is stretched far beyond the ridiculous when those opposed to a soda tax invoke it.
The proposed soda tax, heard yesterday by the House Finance Committee, would add a levy of one penny for each ounce of sugary beverage a distributor sells. So a two-liter bottle of Coke, which costs about $1.50, would cost an additional 60 cents. A 20 ounce bottle one gets from a soda machine or convenience store cooler would run an extra two dimes.
Despite the incremental increase, the soda industry tried in the hearing yesterday to sell to the Committee members on the idea that Rhode Islanders would flock to Massachusetts or Connecticut to get their Coke or Pepsi rather than fork over an extra couple of quarters.
“This legislation would heavily impact sales, particularly in the border stores, which in turn reduces revenue to the state and ultimately impacts the number of jobs associated with the beverage industry,” according to a letter to the Committee from the Rhode Island Beverage Company.
Most people won’t cross the street to save 60 cents, never mind shell out $4 a gallon to do so. But don’t let common sense stand in the way of industry lobbyists claiming that the state’s soda sales would be “heavily” impacted and even lead to people losing their jobs!
Clements Marketplace in Portsmouth – a grocery store on an island, mind you – made this outrageous claim, too. People would have to drive across a bridge to find the nearest Massachusetts convenience store or super market.
“My store and all other border stores will lose sales, the state will lose tax revenue and Rhode Islanders will lose jobs,” wrote store manager Tracy Clements Anthony.
From Clements to the Fall River line is an eight mile drive. That means it would cost a commuter about a dollar in gas to drive to Massachusetts to save 60 cents on a two liter bottle of soda. Portsmouth consumers: that’s a net loss of 40 cents on every two liter you waste your time driving to Fall River for. And that’s if you are driving a Toyota or a Honda; if you’re driving an SUV or a minivan it’ll cost more like $2 in gas to save that 60 cents.
Also notice how similar the language is in the two letters. That’s because these are talking points, not ever to be confused with facts, meant to be repeated often enough until they become part of our collective cultural understanding. In this case, that people will spend more money than they save simply to avoid paying a tax.
Other letters from other soda sellers mirror these talking points, including one from Brigido’s Fresh Market, which points out that their Slatersville store is “less than one mile from the Massachusetts border,” which is true – but there isn’t a convenient convenience or grocery store anywhere nearby across the border.
Meanwhile, the one cent per ounce tax – on a product that is known to contribute to a variety of health problem like diabetes, obesity and heart disease – would raise some $45 million that would be earmarked for public health initiatives.
“We just want them to pay a little extra if want to do something unhealthy,” said Steve DeToy, of the Rhode Island Medical Society. “It’s the same thing we did with tobacco. It worked with tobacco we think it will work with obesity too.”
The “it costs more in gas” argument is itself a fallacy. Nobody is claiming that consumers are going to get in their car and drive miles down the road to buy a 2-liter bottle of Coca-Cola and then drive home – that is an absurd straw-man of the actual argument.
What will in fact happen, and already happens to a lesser extent, is consumers will plan ahead by purchasing items at a lower cost whenever they find themselves in a different state rather than purchasing them in a higher-cost state later. I do this all the time – I don’t buy jack in DC because the taxes are insane. I wait until I’m home in VA and pay 5% on everything instead. My parents used to do that all the time while living in RI as well. They worked in MA (no jobs in RI, obviously) so they’d buy groceries after work in MA instead of after getting home. People who live on the NH-MA border do this all the time as well – no sales tax is like having a 7% off coupon every time you buy something, which adds up to a ton of money over time. It’s foolish to argue that this doesn’t happen. Of course it does.
Whenever I find myself walking down Westminster Street on a hot summer day, wishing I had a cool refreshing Coca Cola, I always think to myself, “self, I wish I remembered to buy a cool refreshing Coca Cola when I was in Massachusetts so I would have one now to quench my thirst and relieve me of this heat,” rather than popping into the nearest bodega to buy myself a cool refreshing Coca Cola. Because if there’s one thing I’ll never do, it is let Rhode Island get one penny more of tax money out of me. I’d rather be thirsty and un-refreshed than allow that to happen.
I’m also all the time dumbfounded when I accidentally find myself in one of the several grocery stores spread across our fine state to find people in there shopping. Surely they know a drive across any of our nearby borders will save them pennies on their taxable purchases. I get ever so upset that these people are apparently so dumb.
Be sarcastic all you want, but lots of people plan ahead to do shopping in lower-cost states, and I am one of them. Obviously it won’t apply to every situation or shut down 100% of commerce within the higher-tax state (nobody has ever argued that), but it does have an impact. Lots of people buy soda in bulk for home consumption, especially if they have a large family with kids. If I can save 5-10% on a large purchase like that, then I am absolutely going to plan ahead and buy in the lower-tax state. I’m surprised that this concept is even being debated, much less ridiculed.
People buying soda in bulk for their kids have more to worry about than a little tax on a Coke.
And actually, you just did argue that you take 100% of your commerce out of DC (or as you put it, you “don’t buy jack,” there), or perhaps I was not understanding your sarcasm.
Just because you are buying something in bulk doesn’t mean you are consuming it at a bulk rate, and there is nothing wrong with diet soda, unless you are one of the anti-science, organic, buy-local ”chemical-phobes” who post here from time to time. Artificial sweeteners are fully approved by the FDA and there has been no demonstrated risk to humans according to hundreds of toxicological and clinical studies.
I take virtually all of my commerce out of DC to avoid their absurdly high taxes, but I never argued that everyone behaves the same way or that I would be able do so regardless of where I worked and lived and what my schedule was like.
Actually, RTW buys all of his soda in Austria. He pays for it with gold.
Silliness. It really is a shame what our legislators will waste their time on. Taxing soda in the name of obesity? Including diet soda in the mix simply calls out that they are trying to drum up some revenue without raising the ire fo the masses by trying to assign the taxes to the public good. Taxes across the board need to be simplified. This kind of hokey revenue increase simply perpetuates the rat’s nest of regulation. Our legistators need to toughen up and redirect their energies on simplifying taxes and managing our spending to keep it within our revenues. Spending time on a soda tax is wasting time that could be spent on more meaningful issues.
Here’s what really bothers me about that argument: The idea that we wouldn’t do something that’s a good idea just because some of the benefit would fall in another state is ridiculous. We’re all Americans, and I, for one, would like to see Massachusetts and Connecticut do better. (Full disclosure, I was born in Connecticut and went to college in Massachusetts.) If we are helping out our neighbors, this really isn’t the end of the world.
A lot of this country’s problems stem from the fact that individual states make decision to benefit themselves at the expense of everyone else. For instance, the main reason we had an explosion of credit card debt in America is that South Dakota and Delaware deregulated their lending industries, so now a bank chartered in South Dakota can sell you a usurious loan that would be illegal in Rhode Island. This got South Dakota and Delaware a few hundred jobs, but it also wrecked our country’s economy. It’s not a responsible or ethical way to think about issues. We actually should value the success of the rest of the country.
It’s all about obesity right? We’re worried about the health of Rhode Islanders right? So they want to raise the soda tax and lower the cigarette tax. Can’t wait to hear the argument for lowering that tax. Is it possible people are driving over state lines to buy their cigarettes in bulk?
Several good points above including RTW’s – in our small state border issues are a legitimate concern. The same for gasoline and liquor taxes. But as pointed out above, competition between states can have bad consequences for all.
Of course we need to combat the high costs of obesity and taxing sugary drinks (no-sugar sodas would not be taxed) is a reasonable way to do so - taxing something to get less of it is a reasonable strategy. Its not surprising that the soft drink industry is so contemptous of public health but our legislature should not share that attitude. But they, and we, do need regional cooperation, after all MA has the same public health problem. And similarly both states need to raise the fixed-cents-per-gallon gas tax to fix roads and bridges and keep transit systems going, but both are afraid of border issues (and perhaps the anti-tax fanatics) and so the transportation systems deteriorate.
I wish RI would pass a prohibitive tax on blog comments generated in other states…
While -I- wouldn’t bother to shop this way, many people do. My girlfriend always tries to shop in Attleboro instead of Warwick.
People respond to small incentives in ways that aren’t always logical. I say that the best solution to the problems isn’t a ‘soda tax’, it’s actually a broader-but-lower sales tax that’s just a hair lower than MA or CT (I’ve done the math, we could be revenue-generating at 4%), combined with rules on food stamps to keep our most obese-vulnerable population from using taxpayer money to buy overpriced sugar water.
If we did my plan, we’d see better results in obesity/health, it would actually improve the job/economy situation, and there would be more money to work with in the state budget.
I don’t know that it’s completely illogical. There is a strong and logical evolutionary impulse to “punish” a state or a business when a person feels like they are being mistreated. People are often willing to bear small costs to send a message that something is wrong or to cost an unethical entity money as a result. This type of behavior establishes trust and norms, and deters socially destructive behavior.