Litter Tax on Businesses Misused and Misplaced
September 10, 2012
No one will argue that Rhode Island’s residents and businesses are taxed at an extraordinary rate, but when someone says, “My taxes are too high,” there is often an unspoken addendum to their complaint. What people should be saying is, “My taxes are too high in relation to the services that are returned.”
Nowhere in Rhode Island’s tax code is this more evident than the tax levied on many business owners — small and large — called the litter permit fee. As per the state tax code, the litter permit fee is applicable to “all Rhode Island sales tax permit holders whose sales relate in whole or in part to the taxable sales of food and/or beverages.” This category includes liquor stores, convenience stores, supermarkets, gas stations, restaurants, catering companies, and food trucks.
This tax, which has been on the books since 1988, charges business owners a fee based on gross sales. For instance, if you own a convenience store that grosses from $100,000 to less than $400,000, your tax would be $75 annually.
That might not seem like much on a per business basis, but these fees add up pretty quickly. In the past four fiscal years, nearly $8 million was generated through the tax, according to Peter McVeigh, the state’s assistant tax administrator.
Money generated from the tax, McVeigh said, was originally earmarked for litter control and prevention programs, such as the Youth Corps Program. The Youth Corps Program was administered by what was then known as Ocean State Cleanup and Recycling (OSCAR). The program provided summer jobs for teenagers, which involved cleaning up public streets and parks. That program was expanded at one point into the Youth Conservation Corps, which not only cleaned up R.I. streets, but also participated in beautification and ecological restoration projects. Both programs have since fallen victim to budget and staffing cuts at the state Department of Environmental Management (DEM).
Follow the money
Today, only about a quarter of the money generated from the litter permit fee is actually allocated for litter control. The state Department of Corrections (DOC) receives an annual allotment of $400,000-$500,000 — through the Department of Transportation — from the tax to fund the highway litter clean-up crews staffed by minimum security inmates.
“The rationale of the litter permit fee on businesses,” said Eugenia Marks, director of the Rhode Island Audubon Society and member of the former Litter Task Force, “was that businesses would actively promote litter prevention to their customers, but we don’t see much of that today.”
Rarely does one see a “Please don’t litter” sign on the way out of a gas station or convenience store.
Marks said the litter permit fee isn’t the only tax that is supposed to fund litter prevention and recycling programs in the state. “There are taxes on hard-to-dispose items like tires and batteries that are supposed to fund these programs, but they also wind up in the general fund.”
The fact that money from the tax is simply folded into the general fund is a problem. Annual reports from the Division of Taxation may show the governor and members of the general assembly where funds are coming from, but once that money is in the general fund, the chances of it being allocated for its intended purpose are slim.
“When the tax was first levied, the funds were transferred to a discrete account,” Marks said. “But in the late ’80s and early ’90s, the General Assembly voted to eliminate not just that account, but all discrete accounts where specifically earmarked funds were held.”
Ignoring the problem
“Litter is a big issue, and it’s pathetic that a state that relies so heavily on tourism and the natural beauty of our landscape refuses to deal with the problem,” said Greg Gerritt, local ecological stalwart and another member of the now-defunct Litter Task Force.
Some work is being done to address litter in Rhode Island’s 39 cities and towns, though. Newport has a litter prevention and abatement program, as does downtown Providence. But, as Gerritt noted, “The Downcity Improvement crews are actually funded by a separate tax on the businesses in downtown Providence.”
The Downcity Improvement folks provide security and participate in beautification projects in and around Kennedy Plaza, as well as cleaning up litter, but paying for litter clean-up efforts amounts to double taxation for those downtown businesses already subject to the litter permit fee.
Enforcement of the state’s litter laws is extremely lax. In the five years from 2005-10, the Rhode Island Traffic Tribunal, where tickets issued for littering are adjudicated, processed a mere 714 littering violations, or about 2.75 citations a week.
Given the ease with which these laws could be enforced — it’s not difficult to find instances of people littering, and the list of those who can write citations for littering includes police officers, parking enforcement officers, and employees of municipal departments of public works and recycling programs — one would think that number would be much higher. In comparison, our traffic courts process about 91,000 speeding tickets in any given year.
Terry Bisson, who works in the DEM’s Division of Planning and Development and served on the state’s Litter Task Force, which fell victim to budget and staffing shortfalls in 2006, said, “DEM actively enforces littering laws at state parks and beaches, but DEM gives much higher priority to enforcement of air and water quality regulations.”
That’s understandable, because the fines in the cases of air and water polluters can range from the tens to hundreds of thousands of dollars. But if you look at the problem of littering collectively, one could reasonably argue that, with proper enforcement, littering violations could bring in a similar amount of money to the state’s coffers.
Bisson said she would like to see the money generated from the litter permit fee and littering citations issued to fund a “Keep Rhode Island Beautiful”-type organization. “We really need multiple approaches to the problem,” she said.
The Rhode Island chapter of Clean Water Action, which has for the past few years advocated for producer responsibility bills in the General Assembly, holds the position that the litter permit fee is a misplaced tax.
“The fee is essentially a tax on doing business in Rhode Island,” said Jamie Rhodes, the chapter’s director. “It’s not levied against the people (producers of goods and packaging) who have the ability to deal with the problem. As a state, when we look at the problem of packaging waste, we have to ask if the fee has passed its usefulness.”
He admitted, though, that passing the cost upstream to the producers — and eliminating the some $2 million that the fee brings into the state’s coffers annually by ending the tax — wouldn’t be a politically popular idea.
Many view litter as a quality-of-life issue, which usually get bumped to the bottom of most folks’ lists of priorities, but litter can pose great risks to public health, safety and infrastructure.
The best example of litter as high-public risk is in our storm drains and sewers. Improperly discarded trash can clog storm drains, causing localized flooding, which in the winter can lead to sheets of ice on the roads. One example of this problem is at the Route 146 on-ramp off Charles Street in Providence. Anyone who has driven by this area knows that even during minor rain events the entrance to the ramp floods almost immediately.
When viewed in this light, litter becomes a much more significant threat to the safety and health of anyone driving or walking in the area.
Given that the litter permit fee generates about $2 million a year, with little of it actually allocated for litter clean up and prevention, and so little money is generated through enforcement of litter laws, the argument that the state doesn’t have the money to deal with the problem of litter — excuse the bad pun — is rubbish.
Recreating a discrete account for the money generated through the tax and a bit more enforcement of litter laws by state and local law enforcement could go a long way when it comes to keeping the state clean and inviting to the tourists that drive a large part of the Ocean State economy.
This follows the “speed trap” mentality. If you know that a particular stretch of road is frequented by police looking for speeders, you slow down. If you know a particular community is hard-nosed about litter law enforcement, you’ll think twice about littering there.
It’s estimated that in the United States some 76 million pounds of litter are created annually. Even with enhanced enforcement and the sequestering of funds from the litter tax, the choice to litter is still, ultimately, in — and then out of — a Rhode Island consumer’s hands. Litter is costly on many levels and an ounce of prevention is worth 76 million pounds of cure.
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Good article. The biggest problem is that revenue from specific taxes and fees in Rhode Island is lumped into the General Fund where the General Assembly can get its grubhooks into it for whatever purpose its desires. Hence specific problem areas, such as litter, have no specific funding level. My personal feeling is I don't mind paying a reasonable tax or fee provided that money is applied to a specific program. Litter taxes and fines should go to a fund designed to fight litter. Gasoline taxes should be applied to highway improvements etc.,But this is Rhode Island where the General Fund reaps all and it will never happen because of the political climate. Another reason why so many people want out of this wretched state.
Agreed that as soon as money that has been earmarked for a purpose gets lumped into the General Fund, it is prey to greedy legislators who use it for whatever political gain they wish to. If there is no longer any state-wide campaign for litter reduction, then the tax should be abolished. But far better would be the restoration of a litter prevention campaign. The amount of litter that happens in this state is truly appalling – if you're ever driving down 95South, try getting off at the old "welcome station" rest stop…the amount of garbage strewn in that area is absolutely apalling. It's embarassing that anyone who pulls off there for whatever reason would see that.
And even in my own neighborhood – a quiet suburban neihhborhood, I'm stunned that people simply just finish up a soda or bag of chips as they're walking around and apparently toss their trash onto my lawn – who DOES THAT??? What kind of ignorant animal does that???
Time to bring back the admittedly somewhat politically incorrect "crying Indian" TV campaign – or something along those lines. For those of us of a "certain age" it made is VERY much aware of a need to care for the world around us – and the image (and more importantly the MESSAGE) STILL resonates in most people I know of my own age group…that's what I call an "effective marketing strategy."
The litter tax was partly put in to appease bottle bill (beverage container deposits) proponents who in the 1980s once succeeded in getting it approved in non-binding referenda in 24 of 25 towns, but the legislature, dominated by the liquor and grocery chains, ignored that. To pass the tax, it did originally go to a restricted receipts account to be used for litter control, but like most restricted receipt accounts, it was scooped to the General Fund by the legislature as soon as there was a deficit to contend with. Contrary to Rudi's point, the gas tax revenue does go entirely to transportation so gasoline sales, having no general sales tax, do not contribute to general government at all. Also, I do not think RI is a "wretched state."
That said, I think we should keep the litter tax, maybe increase it, as it is a tax on the businesses that sell stuff that winds up as litter. Think about the excessive packaging at fast food restaurants, their owners should pay for the ugliness they help produce. It wouldn't hurt to join MA, CT, ME, VT etc with a bottle bill either.