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American Beverage Association placard American Beverage Association placard

American Beverage Association placard

C. Eugene Emery Jr.
By C. Eugene Emery Jr. May 18, 2011

Beverage association says R.I. tax would increase sugary drink prices up to 50 percent

Taxes are on everyone's mind, especially in the wake of Gov. Lincoln Chafee's widely criticized proposal to impose a sales tax on previously exempt items. Now, the folks who bring us a wide variety of beverages are protesting a proposed new tax on sugar-flavored drinks.

In full-page newspaper advertisements, pamphlets and placards on store shelves, the American Beverage Association, an advocacy group representing the nonalcoholic beverage industry, is warning consumers that they are going to see an increase of up to 50 percent in the price of their favorite beverage.

For example, the placard we saw at a local Stop & Shop had a big red stop sign and the words: "The new beverage tax will increase the cost of sodas, juice drinks, sports drinks, iced teas, and flavored water up to 50%."

The claim left us thirsting for the truth, so we started making inquiries.

At issue are two identical bills in the state legislature -- one in the House (H5432), the other in the Senate (S2952). Both call for a tax of 1 cent per ounce on drinks with added sugar or high-calorie sweetener. Thus, a 20-ounce bottle of Pepsi would cost you an extra 20 cents. A 2-liter bottle of Mountain Dew would cost an additional 68 cents.

The potential revenue, estimated at $28 million per year, would not be used to help the cash-strapped state, at least as the legislation is now written. It would instead be given to the Health Department for anti-obesity programs.

The goal is to move consumers away from "sugar-added beverages, which have no nutritional value and which have a tendency to contribute to a lot of health problems," said Steven DeToy, director of public and government affairs for the Rhode Island Medical Society, one of the groups pushing the legislation.

Nationwide, non-diet sodas make up about 70 percent of the $75 billion carbonated soft drink market in the U.S., according to John Sicher, editor and publisher of Beverage Digest. According to the U.S. Department of Agriculture, they now account for half the added sugar in the U.S. diet.

Opponents say the tax would be one more burden to consumers, driving shoppers across state lines to buy their soda while doing little to reduce obesity.

To find out how much the proposed tax would raise prices, we went shopping.

We discovered that when it comes to the purchase of individual bottles and cans, the claim wasn't close to true. A 20-ounce bottle of Coke selling for $1.49 would increase in price by 13 percent, to $1.69. An 8-ounce can of Red Bull selling for $2.29 would cost $2.37, 4 percent more.

A dozen 12-ounce cans of soda priced at $6.19 per case, which we found at a Providence Rite Aid, would cost $7.63, and additional 23 percent.

But if you buy soda on sale and in volume, the percentage increase is greater.

For example, at Stop & Shop, you could get three of those 12-packs for $10 (or $3.34 per pack); in that case the price would increase to $4.78 per pack, or 43 percent more. If you bought a 2-liter bottle of Pepsi (68 ounces) as part of a 2-for-$3 promotion ($1.50 each), it would make each bottle cost $2.18, or adding 45 percent to the cost of each bottle.

And with a 3-liter bottle of Stop & Shop-brand root beer, selling at 4 for $5 (or $1.25 each), the tax would increase the per-bottle price to $2.26, or 81 percent more, even more that the beverage association warns.

So the increases are all over the scanner.

There's another problem with the American Beverage Association claim.

The legislation would tax only drinks to which sugar, high-fructose corn syrup or another high-calorie sweetener has been added. Diet sodas would be exempt. So would drinks with more than 50 percent fruit or vegetable juice. So would beverages you get from a soda fountain. A Coke at McDonald’s, unless it was in a bottle, would not carry the tax.

In its claim, the beverage association is ignoring those distinctions.

One reason may be that the wholesalers might cover the cost of the tax by spreading it out among all beverages. (They made that argument during a March 9 hearing before the House Finance Committee.) That means consumers would pay more for all types of drinks, healthy or otherwise.

However, if they adopted that practice, the overall increase to consumers would fall even further. The "up to 50%" claim, as tenuous as it is, would be even less accurate.

In summary, it is correct that if you were to buy a sugary drink on sale and in bulk, the added price could approach -- and in some cases exceed -- 50 percent because the tax would be levied on a per-ounce basis.

But for individual bottles and cans, the tax would typically be far lower -- 20 percent or less for a 20-ounce drink bought for 98 cents or more.

In addition, opponents of the bill are inaccurately implying that the increase would apply to all sodas, juice drinks, soft drinks, iced teas and flavored waters. That's not true; that's not how the bill is written.

And if the companies decided to jack up the prices for the diet drinks and all-natural fruit drinks that would be exempted from the tax, the beverage association's estimate of the potential price increases would be even less true.

By trying to have it both ways, the American Beverage Association is making a claim that is accurate but leaves out important details. So we rate its statement as Half True.

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