In the Doghouse

Rhode Island Bill to Eliminate Alcohol Sales Tax on Holidays

April 3, 2012

rhode-islandIn these tough budget times, Rhode Island legislators have introduced a bill that will decrease state revenue and contribute to alcohol-related harm. RI House Bill 7725 would remove the state sales tax on alcohol for days surrounding select holidays including Memorial Day, Fourth of July, Labor Day, Thanksgiving, and Winter Holidays. In all, the bill would provide for 66 days of alcohol-tax-free sales each year – and make it easy for drinkers in Rhode Island to buy an entire year's supply of alcohol without paying a dime in sales tax on it.

Why would Rhode Island, a state facing massive budget shortfalls and the possibility of extreme budget cuts, want to reduce taxes on one of the few items that most Americans agree should be taxed more heavily? In addition to extreme pressure from alcohol industry lobbyists, the answer is likely related to “competition” with neighboring states like Massachusetts, which eliminated the sales tax on alcohol in 2010, and Connecticut, which is also trying to dismantle alcohol regulations. These so-called "competitive advantages" come with large costs to the public's health and wallet, as alcohol-related harm is inversely correlated with price.
Before Rhode Island legislators move House Bill 7725 any further, they should consider the health and fiscal impact that removing the alcohol sales tax for nearly a fifth of the year will have on their state. Increasing the price of alcohol has the win-win effect of both increasing state funding and decreasing alcohol-related harm, and this bill does exactly the opposite. What's next? Eliminating the sales tax on alcohol for weeks surrounding the Super Bowl?