Sugar Subsidies Are Killing Small Businesses
Ronald Reagan liked to say, “The most terrifying words in the English language are: I’m from the government and I’m here to help.” For America’s small business owners, these words still ring true. While recent tax reform legislation and regulatory changes from Washington have provided some relief and are helping to level the competitive playing field for small businesses, there is a long list of outdated, harmful, and baffling government programs that still need to change. Perhaps no program that fits that description better than the federal government’s sugar subsidy program.
First enacted more than 80 years ago, the sugar subsidy program was originally intended to help small sugar growers. It has since morphed into a tangled program of taxpayer-backed loans, government mandates, and arbitrary import restrictions. Even worse, this program — which is a hidden tax on manufacturers, food entrepreneurs, and consumers to the tune of $2.4–$4 billion a year — benefits only a handful of wealthy sugar processors. The cost of this program is borne by small food manufacturers, bakers, chocolate makers, and other small businesses that use sugar as an ingredient in their products. Due to these subsidies, U.S. sugar prices are twice as high as the rest of the world.
At the Small Business & Entrepreneurship Council, our focus is on identifying and advocating for policies and initiatives that encourage entrepreneurship and small business growth. We know from our members’ experience that the U.S. sugar subsidy program accomplishes the opposite: It hurts small businesses to subsidize big and politically powerful businesses.
The sugar program is comprised of taxpayer loans and government restrictions that limit the supply of sugar. Since the Great Depression, wealthy sugar companies have wielded their political influence to preserve the program. Today it remains the only agriculture commodity program that has been left untouched by lawmakers. By limiting who can supply sugar and how much sugar can be grown, the U.S. government is picks winners and losers, stifling any possibility for entrepreneurship and innovation in the sector.
American jobs are also on the line, as U.S. companies are forced to compete with companies abroad paying lower prices for sugar. In fact, in some cases, companies that have been founded in the U.S. and passed down generation to generation, have faced pressure to move their operations abroad because of this program. From 1997 to 2015, the sugar program killed about 123,000 jobs, according to the U.S. Census Bureau. The U.S. Department of Commerce also estimates that for every sugar-growing job saved through high U.S. sugar prices, approximately three American manufacturing jobs are lost.
This isn’t hyperbole. Take, for one example, Atkinson Candy Company of Lufkin, Texas. Last year, Eric Atkinson, the head of Atkinson Candy Company and the third generation in his family to run the business, lamented how the high price of sugar in the U.S. was forcing many companies like his to move production overseas or close down altogether. As he put it in an interview to the Houston Chronicle, “All of my competition for the past 30 years has been from companies offshore. Right now it's kind of like playing football on the side of a mountain, and we got the bottom goal.”
Atkinson Candy Company is hardly alone in this struggle. Fortunately, this year Congress has an opportunity to reform the sugar subsidy program through the Farm Bill, which sets U.S. agriculture policy. My hope is that Congress doesn’t let this opportunity go to waste. America’s small businesses and the hundreds of thousands of people employed in food manufacturing are depending on it.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.